Question

Hyper Color Company manufactures widgets. The following data is related to sales and production of the widgets for last year. Selling price per unit ​$160 Variable manufacturing costs per unit ​$62 Variable selling and administrative expenses per unit ​$5 Fixed manufacturing overhead​ (in total) ​$33,000 Fixed selling and administrative expenses​ (in total) ​$8,000 Units produced during the year ​1,800 Units sold during year 900 Using variable​ costing, what is the contribution margin for last​ year?

Answer 1

Answer:

Ans. The contribution margin is $83,700, in percentage is 58.13%.

Explanation:

Hi, first we have to find out which numbers are we going to use, but before getting to that, let´s introduce the formulas that we need to use in order to find the contribution margin in dollars and in percentage.

$Contribution Margin(Dollars)=Total Sales-Total VariableCosts$

$ContributionMargin(Percentage)=\frac{(TotalSells-TotalVariableCosts)}{TotalSells}$

As you can see, all the costs and expenses are to be veriable in order to find the contribution margin so fixed manufacturing overhead, and fixed selling and administrative expenses should not be taken into account for this problem. Now, we need the total revenue, therefore we need to use that 900 units sold during the year and not the 1,800 produced.

On the other hand, we have variable and administrative expenses (variable), since they are variable, they must be taken into account for our calculations. So our numbers are:

Revenue = 900* $160 =$144,000

Variable manufacturing Costs = 900*$62 = $55,800

Variable Sells and admin Expense= 900*$5 = $4,500

Therefore:

$Contribution Margin(Dollars)=144,000-55,800-4,500=83,700$

In percentage.

$ContributionMargin(Percentage)=\frac{(144,000-55,800-4,500)}{144,000}=0.5813$

Contribution Margin ($)= $83,700

Contribution Margin (%)= 58.13%

Best of luck.