Variable Costs, Contribution Margin, Contribution Margin Ratio Super-Tees Compan

Question

Variable Costs, Contribution Margin, Contribution Margin Ratio

Super-Tees Company plans to sell 13,000 T-shirts at $18 each in the coming year. Product costs include:

Variable selling expense is the redemption of a coupon, which averages $0.90 per T-shirt; fixed selling and administrative expenses total $17,000.

Required:

1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to three decimal places (express the ratio as a decimal rather than a percentage).

2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.

3. What if the per unit selling expense increased from $0.90 to $1.95? Calculate new values for the following:
Round dollar amounts to the nearest cent and round ratio values to four decimal places (express the ratio as a decimal rather than a percentage):

Direct materials per T-shirt $6.30 Direct labor per T-shirt $1.26 Variable overhead per T-shirt $0.54 Total fixed factory overhead $37,000

Explanation / Answer

1) calculate following :

2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year.

1) calculate following :

a. Variable product cost per unit (6.30+1.26+0.54) 8.10 b. Total variable cost per unit (8.10+0.90) 9.00 c. Contribution margin per unit (18-9) 9.00 d. Contribution margin ratio (9*100/18) 50% e. Total fixed expense for the year (37000+17000) 54000

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