Question

During its first year of operations, Silverman Company paid $14,000 for direct materials and $19,000 for production workers' wages. Lease payments and utilities on the production facilities amounted to $17,000 while general, selling, and administrative expenses totaled $8,000. The company produced 5,000 units and sold 3,000 units at a price of $15.00 a unit. What is the amount of gross margin for the first year?

Answer 1

The amount of gross margin for the first year is $12,000.

Step-by-step explanation:

Gross margin is calculated by subtracting the cost of goods sold from the total revenues.

In this case, the cost of goods sold can be calculated by adding the cost of direct materials and the cost of production workers' wages, which is $14,000 + $19,000 = $33,000.

The total revenues can be calculated by multiplying the number of units sold by the selling price per unit, which is 3,000 units * $15.00/unit = $45,000.

Therefore, the gross margin for the first year is $45,000 - $33,000 = $12,000.