Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations:

Selling price ........................................................... $100

Units in beginning inventory .......................... 0

Unit produced ...................................................... 5,500

Unit sold ................................................................. 5,400

Unit in ending inventory ................................... 100

Variable costs per unit:

Direct materials .............................................. $23

Direct labor ...................................................... $25

Variable manufacturing overhead ........... $ 2

Variable selling and administrative ......... $ 9

Fixed costs:

Fixed manufacturing overhead .................. $137,500

Fixed selling and administrative ................ $ 70,200

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

Select one:

a. $270,000

b. $135,000

c. $83,900

d. $221,400

Answer 1

Ans.	Option D   $221,400
	*CALCULATIONS:
	*Step 1 : Calculations of Total sales:
	Sales = Units sold * Selling price
	5,400 * $100 =   $540,000
	*Step 2 : Calculations of Total variable cost per unit:
	Particulars	Per unit
	Direct materials	$23
	Direct labor	$25
	Variable manufacturing overhead	$2
	Variable selling and administrative	$9
	Total variable cost per unit	$59
	*Step 3 : Calculations of Total variable cost:
	Total variable cost = Variable cost per unit * Units sold
	$59 * 5,400
	$318,600
	*Step 4 : Calculations of Total contribution margin:
	Particulars	Amount
	Sales	$540,000
	Less: Total variable cost	-$318,600
	Total contribution margin	$221,400