Question

A cement manufacturer has supplied the following data: Tons of cement produced and sold 225,000 Sales revenue $1,035,000 Variable manufacturing expense $421,000 Fixed manufacturing expense $280,000 Variable selling and administrative expense $29,000 Fixed selling and administrative expense $220,000 Net operating income $85,000 What is the company's unit contribution margin?

Answer 1

Answer: $2.6 per unit.

Explanation:

Given that,

Tons of cement produced and sold = 225,000

Sales revenue = $1,035,000

Variable manufacturing expense = $421,000

Fixed manufacturing expense = $280,000

Variable selling and administrative expense = $29,000

Fixed selling and administrative expense = $220,000

Net operating income = $85,000

Sales price per unit:

= $\frac{Sales\ revenue}{total\ cement\ produced\ and\ sold}$

= $\frac{1,035,000}{225,000}$

= $4.6 per unit

Variable cost per unit:

= $\frac{Variable\ manufacturing\ expense\ + Variable\ selling\ and\ administrative\ expense}{total\ cement\ produced\ and\ sold}$

= $\frac{421,000 + 29,000}{225,000}$

= $2 per unit

Contribution margin = Sales price per unit - Variable cost per unit

                                  = $4.6 - $2

                                  = $2.6 per unit