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.
1. what is the amount of gross margin for the first year?
a. $15,000
b. $24,000
c. $20,000
d. $45,000

A. $15,000

Explanation:

Gross margin is the revenue from sales deducted by the production cost of goods sold.

The total cost to produce all 5,000 units is:

The production cost of the 3,000 units sold is:

If each of the 3,000 units sells for $15.00, the gross margin for the first year is:

The correct alternative is A. $15,000

*Note that general, selling, and administrative expenses were not included since they don't qualify as production costs.

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