value 2.00 points Quick Study 19-7 Variable costing and contribution margin LO P

Question

value 2.00 points Quick Study 19-7 Variable costing and contribution margin LO P2 Ramort Company reports the following cost data for its single product. The company regularly sells 20,000 units of its product at a price of $60 per unit. Direct materials Direct labor Overhead costs for the year 10 per unit 12 per unit 3 per unit Variable overhead Fixed overhead per year 40,000 Selling and adminstrative costs for the year 2 per unit Variable Fixed 65,200 20,000 units Normal production level (in units) Compute contribution margin under variable costing RAMORT COMPANY Contribution margin ales ess: Variable expenses Variable manufacuring expense ontribution margin

Explanation / Answer

1) Contribution format income statement under variable costing :

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Sales (20000*60) 1200000 Less: Variable expense Direct material (20000*10) (200000) Direct labour (20000*12) (240000) Variable manufacturing overhead (20000*3) (60000) Variable selling and administrative expense (20000*2) (40000) Total variable expense (540000) Contribution margin 660000 Less: Fixed expense Fixed manufacturing overhead (40000) Fixed selling and administrative expenses (65200) Total fixed expense (105200) Net operating income 554800

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