The Heartlake Corporation manufactures and sells toy gyroscopes. The following data is related to sales and production of the toy gyroscopes for last year. Selling price per unit $8.20 Variable manufacturing costs per unit $1.87 Variable selling and administrative expenses per unit $4.75 Fixed manufacturing overhead (in total) $77,000 Fixed selling and administrative expenses (in total) $80,000 Units produced during the year 520,000 Units sold during year 150,000 Using absorption costing, what is gross profit for last month

The gross profit for the last month is $237,000

Explanation:

Calculation of contribution margin using variable costing =  Sales - variable costs

Sales (150,000 × $8.20) = $1,230,000

- variable manufacturing costs = $280,5000  ( 150,000 units × $1.87)

- variable selling and administrative expenses = $ 712,500  (150,000 units ×$4.75)

= Contribution Margin = $ 237,000

Important. Fixed expenses and overheads are not considered in calculating contribution margin.

Therefore, gross profit for the last month is $237,000

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