A manufacturing company that produces a single product has provided the followin

Question

A manufacturing company that produces a single product has provided the following data concerning its most recent month of operations Seling price $89 Units in beginning Inventory Units produced Units solkd Units in ending Inventory 0 4,300 4,000 300 Vartable costs per unt Direct materiels Direct labor Variable manufacturing overhead Vanable selling and administrative $13 $35 $1 $10 Fixed costs Fixed manufecturing overhend Fixed selling and administrative 77,400 $24,000 The total contribution margin for the month under variable costing is: o $160,000 $88,000 O $42.600 O $120.000

Explanation / Answer

Calculation of contribution margin as per variable costing

Hence, correct option is (d) i.e $120,000

Sales (a) (4,000 x 89) 356,000 Variable production costs: Direct materials (4,300 x 13) 55,900 Direct labor (4,300 x 35) 150,500 Variable manufacturing overhead (4,300 x 1) 4,300 Cost of goods produced 210,700 Add: Opening stock of finished goods Less: Closing stock of finished goods (210,700/4,300) x 300 -14,700 Cost of goods sold 196,000 Add: Variable selling and administrative expenses (4,000 x 10) 40,000 Total variable cost (b) 236,000 Contribution margin (a - b) 120,000

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