Question

One product line of Anita’s Accessories (AA) is the assembly, testing, and marketing of a USB thumb drive — The Speedster.

The parts list for each unit is:

• 1 standard USB plug
• 1 USB mass storage controller
• 1 NAND flash memory chip
• 1 crystal oscillator
• 1 cover

In the table are the current variable costs per Speedster. The fixed costs associated with the manufacture and sales of this product are $480,000 per year and Anita’s uses a marginal tax-rate of 20% for planning purposes.

	Speedster
Sales Price (per unit)	$25.00
Material cost (per unit)	$6.00
Direct labor (per unit)	$4.00
Variable OH (per unit)	$7.00

Due to a shortage of the NAND flash memory chip AA has to use a substitute product. This product increases total direct materials by $0.50 per unit. What is the expected profit before taxes if 110,000 units are sold? You may ignore any changes from the original data given in other questions.

What is the contribution margin per unit of the Speedster?

Answer 1

Expected profit before tax	345,000	-
Conrtribution on 110000 units	825,000
Less: Fixed cost	(480,000)
Expected profit before tax	345,000
Contribution margin per unit:
Selling Price	25
Less:
Material	6.5
Labor	4
Overhead	7
Contribution margin per unit:	7.5