1. Vegas Company has the following unit costs: Variable manufacturing overhead $

Question

1.

Vegas Company has the following unit costs:

Variable manufacturing overhead $ 25

Direct materials 20

Direct labor 19

Fixed manufacturing overhead 12

Variable marketing and administrative 7

Question A)

Vegas produced and sold 10,000 units. If the product sells for $100, what is the contribution margin?

Question B)

Vegas produced and sold 10,000 units. If the product sells for $100, what is the operating profit using a contribution margin income statement?

2.

Grover Company has the following data for the production and sale of 2,000 units.

  
What is the prime cost per unit?

$100

$280

$300

$480

3.

The estimated unit costs for a company to produce and sell a product at a level of 12,000 units per month are as follows:

What are the estimated prime costs per unit?

Grover Company has the following data for the production and sale of 2,000 units.
  

What is the full cost per unit of making and selling the product?

Mountainburg Industries has developed two new products but has only enough plant capacity to introduce one product during the current year. The following data will assist management in deciding which product should be selected.
Mountainburg's fixed overhead includes rent and utilities, equipment depreciation, and supervisory salaries. Selling and administrative expenses are not allocated to individual products.
  

The difference between the $100 estimated selling price for Mountainburg's Product W and its total cost of $88 represents

Sales price per unit $ 800 per unit Fixed costs: Marketing and administrative $ 400,000 per period Manufacturing overhead $ 200,000 per period Variable costs: Marketing and administrative $ 50 per unit Manufacturing overhead $ 80 per unit Direct labor $ 100 per unit Direct Materials $ 200 per unit

Explanation / Answer

(1). Sales 100

Less: Variable cost

Manufacturing overhead 25

Direct material 20

Direct labor 19

Marketing and administrative 7 71

Contribution margin 29

Less: Fixed overhead 12

Net operating profit 17

(2) Prime cost per unit = Direct material + Direct labor

= 200 + 100 = 300

(3) Estimated prime cost per unit= Direct material + Direct labor

= 32 + 20 =52

(4)  The full cost per unit of making and selling the product is

Direct material 200

Direct labor 100

Prime cost 300

Add: Manufacturing overhead

Fixed 100

Variable 80

Works cost 480

Add: Administrative overhead

Fixed 200

Variable 50

Cost of sale (per unit) 730

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