Question

In: Accounting

Aaron Corporation, which has only one product, has provided the following data concerning its most recent...

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

Solutions

Expert Solution

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

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