Question

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

Variable costs per unit:
Direct materials	$	46
Direct labor	$	28
Variable manufacturing overhead	$	2
Variable selling and administrative expense	$	7
Fixed costs:
Fixed manufacturing overhead	$	33,800
Fixed selling and administrative expense	$	8,800

Selling price	$	106
Units in beginning inventory		0
Units produced		2,600
Units sold		2,200
Units in ending inventory		400

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

Multiple Choice

$37,400

$50,600

$66,000

$16,800

Answer 1

$50,600

Working:

a.	Variable costs per unit:
	Direct materials					$          46
	Direct labor					$          28
	Variable manufacturing overhead					$ 2
	Variable selling and administrative expense					$ 7
	Total Variable costs per unit					$          83
b.	Contribution Margin		=	Sales Price Per Unit - Variable cost per unit
			=	$        106	-	$          83
			=	$          23
c.	Total contribution margin			=	Total units sold x Contribution margin per unit
				=	2,200	x	$          23
				=	$       50,600