Laci Corporation’s is a wholesaler that sells a single product. Management has provided the following cost...

Laci Corporation’s is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $154.00 per unit.

Sales volume (units)	11,200	12,230
Cost of sales	$907,200	$990,630
Selling and administrative costs	$674,000	$695,630

The best estimate of the total contribution margin when 11,580 units are sold is:

$307,160

$716,190

$226,770

$602,160

Expert Solution

Using the high-low method to estimate variable components of the costs:
Variable cost of sales = Change in cost / Change in activity
= ($990630 - $907200) ÷ (12,230 units - 11,200 units)
(990630-907200)/(12230-11200)
= $81.00 per unit
Variable selling and administrative cost = Change in cost ÷ Change in activity
= ($695,630 - $694,000) ÷ (12,230 units - 11,200 units)
=(695630-694000)/(12230-11200)
= $21 per unit
Total variable cost per unit = Variable cost of sales + Variable selling and administrative cost
= $81.00 per unit + $21 per unit = $102 per unit
Contribution margin per unit = Selling price per unit - Total variable cost per unit
Contribution margin per unit = 154-102=				52
Total contribution margin = Contribution margin per unit × Total unit sales
= $52per unit × 11,580 units =

ekkarill92 answered 1 year ago

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