The Landes Excavating Company experienced the following costs in 2007: Direct ma
ID: 2504762 • Letter: T
Question
The Landes Excavating Company experienced the following costs in 2007:
Direct materials $1.75/unit
Direct labor $2.00/unit
Variable manufacturing overhead $2.50/unit
Variable selling $.75/unit
Fixed manufacturing overhead $50,000
Fixed selling $15,000
Fixed administrative $5,000
During the year the company manufactured 100,000 units and sold 80,000 units. If the average selling price per unit was $22.65 what is the company's contribution margin per unit?
$16.40
$15.65
$18.90
$13.65
Hunziker Company uses weighted average process costing and has 9,000 equivalent units of production for direct material and 8,500 equivalent units of production for conversion costs in May. Costs were incurred in May as follows:
Direct Material
Conversion
Total
Beginning WIP
$900
$1,500
$2,400
Incurred during May
$12,600
15,500
$28,100
Total
$13,500
$17,000
$30,500
What is the total cost per equivalent unit for May?
$1.74
$1.50
$2.00
$3.50
a.$16.40
b.$15.65
c.$18.90
d.$13.65
Explanation / Answer
1) Unit Contribution margin = Unit revenue - Unit Variable Cost
Unit Revenue = $ 22.65
Unit Variable Cost = 1.75 + 2+ 2.5 + 0.75 = $7
Unit Contribution margin = 22.65 - 7 = $ 15.65
Answer option (b)
2) Cost per unit of direct material = 13500/9000 = $ 1.5
Cost per unit of conversion = 17000/8500 = $ 2
Using weighted average method,
Total cost per equivalent unit = (9000* 1.5 + 8500* 2) / (9000+ 8500) = $1.74
Answer option (a)
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