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

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

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

Contribution margin ratio = Contribution margin / Selling price * 100

Contribution margin ratio = $25.37 / $45 * 100 = 56.38%

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

Selling price per unit	$ 45.00
Less: Unit product cost under absorption costing	$ (19.16)
Gross margin	$ 25.84

Gross margin ratio = Gross margin / Selling price * 100

Gross margin ratio = $25.84 / $45 * 100

Gross margin ratio = 57.42%

ekkarill92 answered 1 year ago

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