Younes Inc. manufactures industrial components. One of its products, which is us

Question

Younes Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as PO6. Data concerning this product are given below Selling price Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Variable selling expense Fixed selling and administrative expense $220 s 38 s 16 s 16 The above per unit data are based on annual production of 4,000 units of the component. Assume that direct labor is a variable cost What is the current contribution margin per unit for contponent PO6 based on its selling price of $220 and its annual production of 4,000 units?

Explanation / Answer

Contribution Margin $ 169 per unit Working: Variable cost per unit: Direct Materials $          38 direct Labor $ 1 Variable Manufacturing overhead $ 8 Variable Selling expense $ 4 Total Variable cost per unit $          51 Contribution Margin per unit = Selling Price per unit - Variable cost per unit = $        220 - $          51 = $        169

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