40) Macy Corporation\'s relevant range of activity is 4,000 units to 8,000 units

Question

40) Macy Corporation's relevant range of activity is 4,000 units to 8,000 units. When it 40) produces and sells 6,000 units, its average costs per unit are as follows: Average Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense Cost per Unit $ 4.95 s 3.25 $ 1.45 s 4.20 s 1.05 S 0.60 1.00 s 0.50 If the selling price is $23.50 per unit, the contribution margin per unit sold is closest to: A) $12.35 B) $6.50 C) $9.65 D) $15.30

Explanation / Answer

Dear Student,

Correct answer is : A ) $ 12.35.

Explanation:

1. Calculation of contribution Margin Amount ($) Selling Price (p. u) 23.5 Less: Direct Labor 4.95 Direct Material 3.25 Variable manufacturing overhead 1.45 Sales commision 1 Variable administrative expenses 0.5 Contribution Margin per unit 12.35 2. Contribution margin is calculated by formula sales - variable cost So, only variable expenses is taken into account. 3. Sales commission is generally relted to the units sold. hence, it’s a variable expense.

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