1. At a volume of 24,000 units, Dries reported sales revenues of $1,032,000, var
ID: 2466581 • Letter: 1
Question
1. At a volume of 24,000 units, Dries reported sales revenues of $1,032,000, variable costs of $312,000, and fixed costs of $355,000. The company's contribution margin per unit is:
$30.
$28.
$32.
$17.
a different amount.
2. Ribco Co. makes and sells only one product. The unit contribution margin is $9 and the break-even point in unit sales is 20,000. The company's fixed costs are:
$40,000.
$180,000.
$50,400.
an amount other than those above.
$76,000.
3. Lone Star has computed the following unit costs for the year just ended:
3.1 Under variable costing, each unit of the company's inventory would be carried at:
$85.
$58.
None of these.
$37.
$65.
3.2 Under absorption costing, each unit of the company's inventory would be carried at:
$58.
$65.
$37.
$85.
None of these.
Direct material used $10 Direct labor 18 Variable manufacturing overhead 30 Fixed manufacturing overhead 27 Variable selling and administrative cost 7 Fixed selling and administrative cost 18Explanation / Answer
1 Sales revenue $1,032,000 The volume of sales 24,000 Sale price per unit $ 43.00 Contribution per unit: Variable cost $ 312,000 Sales in units 24,000 Variable cost per unit $ 13.00 The contribution margin per unit is the difference between selling price per unit and variable cost per unit. Selling price per unit $43 Less: Variable cost per unit ($13) Contribution margin per unit $30 The contribution margin per unit is $30. 2 The contribution margin per unit of Ribco Co. is $9. The break even sales in units of the company is 20,000. At the break even point of sales the company has no profit and no loss, which means the cost of the company is equal to revenues of the company. Therefore the fixed cost of the company would be equal to contribution margin at the break even sales point. Contribution margin in break even sales=Fixed cost 20,000×$9 = Fixed cost Fixed cost =$180,000 The fixed cost of the company is $180,000. 3 3.1 Under variable costing, unit cost includes only variable cost calculated as under: Direct Material $10 Direct Labor $18 Variable manufacturing overhead $30 Unit product cost under variable costing $58 The unit product cost under variable costing is $58. The selling and administrative expenses(variable and fixed) are irrelevant for calculation of unit product cost. 3.2 Under absorption costing, unit cost includes variable cost and fixed manufacturing overhead cost calculated as under: Direct Material $10 Direct Labor $18 Variable manufacturing overhead $30 Fixed manufacturing overhead cost per unit $27 Unit product cost under absorption costing $85 The unit product cost under absorption costing is $85. The selling and administrative expenses(variable and fixed) are irrelevant for calculation of unit product cost.
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