Answer:
Contribution margin= $20.15
Explanation:
First, we need to calculate the estimated overhead rate for each activity cost pool.
To calculate the estimated manufacturing overhead rate we need to use the following formula:
Estimated manufacturing overhead rate= total estimated overhead costs for the period/ total amount of allocation base
Assembly= 1,363,440/69,000= $19.76 per machine-hour
Processing orders= 45,254/1,700= $26.62 per order
Inspection= 120,754/1,730= $69.8
Now, we need to allocate overhead to S78 N units:
Allocated MOH= Estimated manufacturing overhead rate* Actual amount of allocation base
Assembly= 19.76*740 hours= 14,622.4
Processing= 26.62*30= 798.6
Inspection= 69.8*10= 698
Total= $16,119
Unitary overhead= 16,119/490= $32.90
Finally, we can calculate the unitary cost and product margin:
Total unitary cost= direct material + direct labor + allocated overhead
Total unitary cost= 50.61 + 12.74 + 32.90= $96.25
Contribution margin= selling price - total unitary cost
Contribution margin= 116.4 - 96.25= $20.15
