Question

QS 19-10 Computing contribution margin LO P2 D’Souza Company sold 11,500 units of its product at a price of $77.00 per unit. Total variable cost is $49.40 per unit, consisting of $39.70 in variable production cost and $9.70 in variable selling and administrative cost. Compute the contribution margin for this company.

Answer 1

Answer: $317,400

Explanation: The first step is to calculate the sales value

Sales = Unit sold × Price per unit

11500 × $77.00 = $885,500

calculation Total variable cost

i. Variable production cost = Units × variable production cost per unit

11500 × $39.70 = $456,550

ii. Variable selling and administrative cost = unit × variable selling and administrative cost per unit

11500 × $9.70 = $111,550

Total variable cost = Variable production cost + variable selling and administrative cost

Total variable cost = $456,550 + $111,550

                               = $568,100

Calculation of contribution margin

Contribution margin = Sales - total variable cost

                                   = $885,500- $568,100

                                    = $317,400