Question

Ramort Company reports the following cost data for its single product. The company regularly sells 20,000 units of its product at a price of $60 per unit.Direct materials $10 per unit Direct labor $12 per unit Overhead costs for the yearVariable overhead $3 per unit Fixed overhead per year $40,000 Selling and administrative costs for the year Variable $2 per unit Fixed $65,200 Normal production level (in units) 20,000 units Compute contribution margin under variable costing.

Answer 1

Answer:

Contribution margin under variable costing is $660,000

Explanation:

As we know that, the contribution margin equals to

Sales - variable cost

In the variable costing, we recognized the variable expense and the variable selling and administrative cost

So,

The variable cost could be

1. Variable expense per unit= Direct material per unit + direct labor per unit + variable overhead

= $10 + $12 + $3

= $25

So, variable expense = 20,000 units × $25 = $500,000

And, the variable selling and administrative cost =  20,000 units × $2 = $40,000

Sales is = 20,000 units × $60 = $1,200,000

Now put these values to the above formula  

So, the value would equal to

= $1,200,000 - $500,000 - $40,000

= $660,000