Washington Company manufactures and sells a single product. The following costs
ID: 2386175 • Letter: W
Question
Washington Company manufactures and sells a single product. The following costs were incurred during the company’s first year of operation:Direct Material $18.00
Direct labor $5.00
Variable manufacturing overhead $4.00
Variable selling and administrative $5.00
Fixed cost for year:
Fixed manufacturing overhead $150,000
Fixed selling and administrative expenses $110,000
During the year, the company produced 25,000 units and sold 20,000 units. The selling price of the company’s product is $45.00 per unit.
Compute the company’s contribution margin assuming the company uses the contribution margin format income statement.
Explanation / Answer
Total variable cost: (Amount in $) Direct materials 18 Direct labor 5 Variable manufacturing overhead 4 Variable selling and administrative expense 5 Variable cost per unit 32 Fixed Cost Fixed manufacturing overhead 150,000 Fixed selling and administrative overhead 110,000 Total fixed cost 260,000 Per unit (a) units sold (b) Total (a*b) Sale proceeds 45 20,000 900,000 Less: Variable cost 32 20,000 640,000 Contribution 13 260,000 Less: total fixed cost 260,000 Net profit 0
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