Question
In: Accounting
The Hans Solo Company reports the following cost data for its single product. The company regularly...
The Hans Solo Company reports the following cost data for its
single product. The company regularly sells 300,000 units of its
product at a price of $45.00 per unit.
|
Direct materials |
$3.86 |
per unit |
|
Direct labor |
$9.03 |
per unit |
|
Overhead costs for the year |
||
|
Variable overhead |
$4.75 |
per unit |
|
Fixed overhead per year |
$456,700 |
|
|
Selling and administrative costs for the year |
||
|
Variable |
$1.99 |
per unit |
|
Fixed |
$89,100 |
|
|
Normal production level (in units) |
300,000 |
units |
If using variable costing:
a. What is the total product cost per unit? Round your answer to the nearest cent (2 decimal places).
b. What is the contribution margin per unit? Round your answer to the nearest cent (2 decimal places).
c. What is the contribution margin ratio? Round your answer to 2 decimal places and include a percentage (%) sign.
If using absorption costing:
d. What is the total product cost per unit? Round your answer to the nearest cent (2 decimal places).
e. What is the gross margin per unit? Round your answer to the nearest cent (2 decimal places).
f. What is the gross margin percentage? Round your answer to 2 decimal places and include a percentage (%) sign.
Solutions
Expert Solution
a.
| Computation of Unit Product Cost | |
| Variable Costing | |
| Direct Meterial | $ 3.86 |
| Direct Labour | $ 9.03 |
| Variable Manufactoring Overhead | $ 4.75 |
| Unit product cost | $ 17.64 |
b.
| Selling price per unit | $ 45.00 |
| Less: Unit product cost under variable costing | $ (17.64) |
| Less: Variable selling and administrative costs | $ (1.99) |
| Contribution margin | $ 25.37 |
c.
| Contribution margin ratio = Contribution margin / Selling price * 100 |
| Contribution margin ratio = $25.37 / $45 * 100 = 56.38% |
d.
| Computation of Unit Product Cost | |
| Absorption Costing | |
| Direct Meterial | $ 3.86 |
| Direct Labour | $ 9.03 |
| Variable Manufactoring Overhead | $ 4.75 |
| Fixed Manufactoring Overhead ($456,700/300,000) | $ 1.52 |
| Unit Product Cost | $ 19.16 |
e
| Selling price per unit | $ 45.00 |
| Less: Unit product cost under absorption costing | $ (19.16) |
| Gross margin | $ 25.84 |
f.
| Gross margin ratio = Gross margin / Selling price * 100 |
| Gross margin ratio = $25.84 / $45 * 100 |
| Gross margin ratio = 57.42% |
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