18. A business operates at 100% of its capacity during its first month and incur

Question

18. A business operates at 100% of its capacity during its first month and incurs the following costs Production costs (5,000 units): Direct materials Direct labor Variable factory overhead Fixed factory overhead $70,000 20,000 10,000 2,000 $1 $102,000 Operating expenses: Variable operating expenses $17,000 Fixed operating expenses 1.000 18,000 If 1,000 units remain unsold at the end of the month and sales total $150,000 for the month, what is the amount of the contribution margin that would be reported on the variable costing income statement? a. $51,400 b. $52,000 c. $54,000 d. $53,000

Explanation / Answer

Calculate contribution margin

so answer is d) $53,000

Sales 150000 Direct material (70000/5000*4000) (56000) Direct labour (20000/5000*4000) (16000) Variable factory overhead (10000/5000*4000) (8000) Variable operating expense (17000) Contribution margin 53000

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