Lawson Manufacturing Company paid production workers wages o

Lawson Manufacturing Company paid production workers wages of $100,000. It incurred material costs of $120,000 and manufacturing overhead costs of $160,000. Selling and general administrative salaries were $80,000. Lawson started and completed 1000 units of product and sold 800 of these units. The Company sets sales price at $220 above the average per-unit production cost. Based on the information alone, determine the amount of gross margin and net income? What is Lawson’s pricing strategy called? (6 points)

Solution

Calculate average production cost per unit :

Sale price per unit = 380+220 = $600 per unit

Calculate amount of gross margin and net income :

Lawson\'s pricing strategy called Cost plus pricing method.