Question

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations:

Selling price	$	98
Units in beginning inventory		0
Units produced		3,400
Units sold		2,990
Units in ending inventory		410

Variable costs per unit:
Direct materials	$	21
Direct labor	$	38
Variable manufacturing overhead	$	6
Variable selling and administrative expense	$	4
Fixed costs:
Fixed manufacturing overhead	$	44,600
Fixed selling and administrative expense	$	2,800

The total contribution margin for the month under variable costing is:

Multiple Choice

• $39,310

• $98,670

• $42,110

• $86,710

Answer 1

Answer- The total contribution margin for the month under variable costing is =$86710.

Explanation- Unit product cost under Variable costing:-Direct materials + Direct Labor+ Variable manufacturing overhead

=$21+$38+$6

= $65 per unit

AARON CORPORATION
Contribution Margin statement (Using variable costing approach)
Particulars			Amount
			$
Sales (a)	2990 units*$98 per unit		293020
Less:- Variable cost of goods sold (b)
Opening inventory
Add:- Variable cost of goods manufatured		221000
Direct materials	3400 units*$21 per unit	71400
Direct labor	3400 units*$38 per unit	129200
Variable factory overhead	3400 units*$6 per unit	20400
Variable cost of goods available for sale		221000
Less:- Closing inventory	410 units*$65 per unit	26650	194350
Gross contribution margin C= a-b			98670
Less:-Variable selling & administrative exp.	2990 units*$4 per unit		11960
Contribution margin			86710