Question

Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows: Per Unit Direct materials $ 22.50 Direct labor $ 7.50 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 19.00 Variable selling & administrative expense $ 2.70 Fixed selling & administrative expense $ 8.60 The normal selling price of the product is $67.80 per unit. An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.90 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. What is the contribution margin per unit on normal sales? (Round your intermediate calculations to 2 decimal places.) Garrison 16e Rechecks 2017-09-13
a. $7.20 per unit
b. $33.40 per unit
c. $5.80 per unit
d. $7.70 per unit

Answer 1

Answer:

b. $33.40 per unit

Explanation:

The computation of the contribution margin per unit on normal sales is shown below:

= Selling price - Direct materials - Direct labor - Variable manufacturing overhead - Variable selling & administrative expense

= $67.80 - $22.50 - $7.50 - $1.70 - $2.70

= $33.40 per unit

As we know that

Contribution margin per unit = Selling price per unit - Variable expense per unit

All other information which is given is not relevant. Hence, ignored it