Answer:
they need to limit the material and labor costs to $22.75
Explanation:
given data
combined promotion = $3 million
contribution margin ratio = 35%
Selling price = $35 per unit
to find out
what would they need to limit the material and labor costs to
solution
we get here Contribution margin per unit that is express as
Contribution margin per unit = $35 × 35%
Contribution margin per unit = $12.25 per unit
and Variable cost will be
Variable cost = $35 - $12.25
Variable cost = $22.75 per unit
and we know Variable cost is also express as
Variable cost = Direct materials costs + Direct labor costs + Direct factory overheads ..............1
here direct factory overheads is 0 and Direct materials costs + Direct labor costs is $22.75
so put in equation 1
Variable cost = $22.75 + 0 = $22.75
so we can say that they need to limit the material and labor costs to $22.75
