Question

In: Accounting

Calculate the contribution margin per unit and the total contribution margin

Sweet Taste has the capacity to produce either 52,000 corncob pipes or 30,000 cornhusk dolls per year. The pipes cost $6.75 each to produce and sell for $15.00 each. The dolls sell for $17.50 each and cost $7.75 to produce.

Required
Calculate the contribution margin per unit and the total contribution margin for Pipes and Dolls. Assuming that Sweet Taste can sell all it produces of either product, should it produce the corncob pipes or the cornhusk dolls? (Round "Contribution margin per unit" answers to 2 decimal places.)

Solutions

Expert Solution

sales price minus Variable costs= contribution margin

pipes: 15.00 - 6.75 = 8.25

dolls: 17.50 - 7.75 = 9.75

CM x Units produced and sold = Total CM

Pipes: 8.25 x 52,000 = 429,000

dolls: 9.75 x 30,000 = 292,500

 It should produce the corncob pipes.

It should produce the corncob pipes.

Christopher Mann answered 3 years ago
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