Question

Younes Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as P06. Data concerning this product are given below: Per Unit Selling price $ 220 Direct materials $ 38 Direct labor $ 1 Variable manufacturing overhead $ 8 Fixed manufacturing overhead $ 16 Variable selling expense $ 4 Fixed selling and administrative expense $ 16 The above per unit data are based on annual production of 4,000 units of the component. Assume that direct labor is a variable cost. What is the current contribution margin per unit for component P06 based on its selling price of $220 and its annual production of 4,000 units? Multiple Choice $51 per unit $137 per unit $169 per unit $173 per unit

Answer 1

Answer:

$169 per unit

Explanation:

The computation of the contribution margin per unit is shown below:

Contribution margin per unit = Selling price per unit - Variable expense per unit

where,

Variable expense per unit = Direct materials per unit + Direct labor per unit + Variable manufacturing overhead per unit + Variable selling expense per unit

= $38 + $1 + $8 + $4

= $51

And, the Selling price per unit is $220

Now put these values to the above formula  

So, the contribution margin would equal to

= $220 - $51

= $169 per unit