Darby Company, operating at full capacity, sold 98,550 units at a price of $123
ID: 2341002 • Letter: D
Question
Darby Company, operating at full capacity, sold 98,550 units at a price of $123 per unit during the current year. Its income statement for the current year is as follows:
The division of costs between fixed and variable is as follows:
Management is considering a plant expansion program that will permit an increase of $1,107,000 in yearly sales. The expansion will increase fixed costs by $110,700, but will not affect the relationship between sales and variable costs.
Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places.
Determine (a) the unit variable cost and (b) the unit contribution margin for the current year. Enter the final answers rounded to two decimal places.
Sales $12,121,650 Cost of goods sold 5,986,000 Gross profit $6,135,650 Expenses: Selling expenses $2,993,000 Administrative expenses 2,993,000 Total expenses 5,986,000 Income from operations $149,650Explanation / Answer
a. Unit Variable Cost
Unit Variable Cost = Total variable Cost / Units Sold
Total variable Cost = COGS * 70% + Selling Expenses * 75% + Administrative expenses * 50%
Total variable Cost = 5986000 * 70% + 2993000 * 75% + 2993000 * 50%
Total variable Cost = 4190200 + 2244750 + 1496500
Total variable Cost = 7931450
Unit Variable Cost = Total variable Cost / Units Sold
Unit Variable Cost = 7931450 / 98550
Unit Variable Cost = $80.48
b. Unit Contribution margin = Unit selling price - Unit variable cost
Unit Contribution margin = $123 - $80.48
Unit Contribution margin = $42.52
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