Walnut Corporation sells desks at $480 per desk.The costs associated with each desk are as follows: $$\begin{array} { l r }
\text { Direct materials } & \$ 195 \
\text { Direct labor } & 126 \
\text { Variable factory overhead } & 51
\end{array}$$ Total fixed costs for the period are $456,840.The contribution margin per desk is _____.
A)$195
B)$108
C)$51
D)$126

Question

Walnut Corporation sells desks at $480 per desk.The costs associated with each desk are as follows: $$\begin{array} { l r } 
\text { Direct materials } & \$ 195 \
\text { Direct labor } & 126 \
\text { Variable factory overhead } & 51
\end{array}$$ Total fixed costs for the period are $456,840.The contribution margin per desk is _____.
A)$195
B)$108
C)$51
D)$126

Quizplus · Accepted Answer

The contribution margin per desk is calculated by subtracting all variable costs (direct materials, direct labor, and variable factory overhead) from the selling price per desk. Thus, contribution margin per desk = $480 - ($195 + $126 + $51) = $480 - $372 = $108.