Question

Aaron Corporation, which has only one product, has provided the following data concerning its most recent month of operations: Selling price $ 112 Units in beginning inventory 0 Units produced 5,100 Units sold 4,490 Units in ending inventory 610 Variable costs per unit: Direct materials $ 21 Direct labor $ 45 Variable manufacturing overhead $ 6 Variable selling and administrative expense $ 4 Fixed costs: Fixed manufacturing overhead $ 57,700 Fixed selling and administrative expense $ 3,300 The total contribution margin for the month under variable costing is:

Answer 1

Answer:

The total contribution margin for the month under variable costing is $161,640.

Explanation:

Contribution: The contribution shows a difference between the sales and variable cost.

So, Contribution = Sales per unit - Variable cost per unit

Variable costing : Under variable costing, the cost which is change when production level changes than it is known as variable costing.

The examples of variable costing is direct material, direct labor, variable manufacturing overhead, etc.

Computation of the total contribution margin for the month under variable costing is shown below :

First we have to calculate contribution margin . The calculation is computed below:

= Selling price - direct material - direct labor  - Variable manufacturing overhead - Variable selling and administrative expense

= $112 - $21 - $45 -$6 - $4

= $36

Hence, the contribution margin is $36.

Now, the total contribution margin = Unit sold × contribution margin

                                                          = 4,490 × $36

                                                          = $161,640

Hence, the total contribution margin for the month under variable costing is $161,640.