Question

A company that produces and sells a single product for $22 per unit has provided the following volume and average cost data for two accounting period:

Level of activity (unit) ---------------------------- ---------------- 1,000 2,000

Direct materials ------------------------- ------------------------ $4.00 $4.00

Direct Labor----------------------------------------------------- $3.00 $3.00

Manufacturing overhead-------------------------------------------- $3.50 $2.50

General, selling, and administrative expenses-------------- $1.00 $0.50

1. The best estimate of the total contribution margin when 4,300 units are sold is:

$64,500

$45,150

$58,050

$51,600

2. The best estimate of the Operating Income when 4,000 units are sold is:

$51,000

$55,050

$56,050

$51,600

Answer 1

Paticulars	4300 Units	4000 Units
Sales	94,600.00	88,000.00
Less Variable Expenses
Direct Matreials	17,200.00	16,000.00
Direct Labour	12,900.00	12,000.00
Manufacturing overhead	6,450.00	6,000.00
Total Variable cost	36,550.00	34,000.00
Contribution Margin	58,050.00	54,000.00
Fixed cost
Manufacturing overhead	2,000.00	2,000.00
General, selling, and administrative expenses	1,000.00	1,000.00
Total fixed costs	3,000.00	3,000.00
Net operating income	55,050.00	51,000.00
Q1 The best estimate of the total contribution margin when 4,300 units are sold is $58,050
Q2 The best estimate of the Operating Income when 4,000 units are sold is 51,000