Question

In: Accounting

If variable cost of goods sold totaled $66,440 for the year (16,610 units at $4 each)...

If variable cost of goods sold totaled $66,440 for the year (16,610 units at $4 each) and the planned variable cost of goods sold totaled $99,330 (14,190 units at $7 each), the effect of the unit cost factor on the change in contribution margin is:

a.$9,680 increase

b.$49,830 decrease

c.$9,680 decrease

d.$49,830 increase

Solutions

Expert Solution

  • The actual variable cost is less than planned variable cost in totality.
  • However, unit variable cost planned is MORE than unit variable cost in actual

A

Planned variable cost

$                       7.00

B

Actual Variable cost

$                       4.00

C = A - B

Increase in Unit contribution

$                       3.00

D

Actual Units

                     16,610

E = C x D

Effect of unit cost on contribution margin

$            49,830.00

  • Since unit variable cost planned is MORE, the decrease in variable cost in actual would have resulted in “Increase” in contribution margin.
  • Correct answer is therefore: Option ‘D’ $ 49,830 Increase

ekkarill92 answered 3 years ago
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