Krepps Corporation produces a single product. Last year, Krepps manufactured 32,210 units and sold 26,700 units. Production costs for the year were as follows: Sales totaled $1,241,550 for the year, variable selling and administrative expenses totaled $138,840, and fixed selling and administrative expenses totaled $199,702. There was no beginning inventory. Assume that direct labor is a variable cost.The contribution margin per unit was:
A) $26.30 per unit
B) $21.10 per unit
C) $16.80 per unit
D) $22.80 per unit

Question

Krepps Corporation produces a single product. Last year, Krepps manufactured 32,210 units and sold 26,700 units. Production costs for the year were as follows:  Sales totaled $1,241,550 for the year, variable selling and administrative expenses totaled $138,840, and fixed selling and administrative expenses totaled $199,702. There was no beginning inventory. Assume that direct labor is a variable cost.The contribution margin per unit was:
A) $26.30 per unit 
B) $21.10 per unit 
C) $16.80 per unit 
D) $22.80 per unit

Quizplus · Accepted Answer

Contribution Margin per unit = Sales Price per unit - Variable Costs per unit

Sales price per unit = Total Sales / Total Units sold
                     = $1,241,550 / 26,700
                     = $46.50 per unit

Variable costs per unit = (Direct Material + Direct Labor + Variable Overhead) / Total Units
                              = ($482,584 + $374,942 + $16,347) / 32,210
                              = $44.60 per unit

Contribution Margin per unit = $46.50 - $44.60
                                         = $1.90 per unit
Therefore, the contribution margin per unit was $21.10 per unit (option B).

Krepps Corporation Produces a Single Product