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Question
Dataport Company reports the following annual cost data for its single product:
| Normal production and sales level | 89,000 units |
| Direct materials | $14.00 per unit |
| Direct labor | $21.00 per unit |
| Variable overhead | $27.00 per unit |
| Fixed overhead | $3,738,000 in total |
This product is normally sold for $230 per unit. If Dataport increases its production to 100,000 units, while sales remain at the current 89,000 unit level, by how much would the companys gross margin increase or decrease under absorption costing? Assume the company has idle capacity to double current production.
Answer
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