(A) Compute the Gross Margin, Operating Income, and Ending Inventory

Essay

(a) Compute the gross margin, operating income, and ending inventory for Dover Automotive Components, Inc.
(b) Assume that production of part D-1251 increases by 25 units during the given period (sales remain constant). Re-compute the above figures.
(c) Ernest Murphy, the cost manager of Dover Automotive Components, argues with the controller that variable costing is a better method for product costing. Using the information in part b above, re-compute the operating income for Dover Automotive Components using variable costing. Explain any differences in the operating incomes obtained under the two different methods.
Additional information:
● Sales revenue: $5,200,000
● Beginning inventory: $275,000
● The only spending increase was for material cost due to increased production. All other spending as shown above was unchanged.
● Sales of all parts are the same as the number of units produced.
Dover Automotive Components, Inc. uses the absorption costing method.
Required
Consider the following cost and production information for Dover Automotive Components, Inc.