Question

Use the following information to answer this question.Harris Company produces a single product. Last year, Harris manufactured 17,000 units and sold 13,000 units. Production costs for the year were as follows:Production Cost DataDirect materials $153,000Direct labor $110,500Variable manufacturing overhead $204,000Fixed manufacturing overhead $255,000Sales were $780,000 for the year, variable selling and administrative expenses were $88,400, and fixed selling and administrative expenses were $170,000. There was no beginning inventory. Assume that direct labor is a variable cost.Required:
1. The contribution margin per unit was _______________.A. $32.50.B. $17.50.C. $25.70.D. $27.30.

Answer 1

Answer:

D) $27.3 per unit

Explanation:

The contribution margin per unit is Selling price - Variable cost. This shows how much each unit is contributing towards fixed costs.

To calculate CM per unit, we frist need to calculate the total of variable cost that relate to our 13000 units of products sold.

17000 are the units produced

13000 are the units sold

Total Variable costs

Direct material = 153000 * 13/17 = 117000

Direct labor = 110500 * 13/17 = 84500

Variable manufacturing OH = 204000 * 13/17 = 156000

Variable selling & admin OH = 88400 * 13/17 = 67600

Total Variable Cost = 117000 + 84500 + 156000 + 67600 = 425100

Total Contribution margin (CM) = 780000 - 425100 = 345900

CM per unit = 345900 / 13000 = $27.3 / unit

Answer 2

Answer:

D. $27.30.

Explanation:

Direct materials $153,000

Direct labor $110,500

Variable manufacturing overhead $204,000

variable selling and administrative expenses were $88,400

Total variable cost: 555,900

We divide this by the 17,000 manufactured unit to know the unit variable cost. variable cost $32.7

then we solve for sales price per unit

$780,000 total revenue / 13,000 units sold = $60

Last we subtract the variable cost to get the contribution per unit

$60 sales revenue - $32.7 variable cost = $27.30