Younes Incorporated manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as P06. Data concerning this product are given below: The above per unit data are based on annual production of 4,000 units of the component. Assume that direct labor is a variable cost.What is the current contribution margin per unit for component P06 based on its selling price of $220 and its annual production of 4,000 units?
A) $51 per unit
B) $137 per unit
C) $169 per unit
D) $173 per unit

Question

Younes Incorporated manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as P06. Data concerning this product are given below:  The above per unit data are based on annual production of 4,000 units of the component. Assume that direct labor is a variable cost.What is the current contribution margin per unit for component P06 based on its selling price of $220 and its annual production of 4,000 units?
A) $51 per unit 
B) $137 per unit 
C) $169 per unit 
D) $173 per unit

Quizplus · Accepted Answer

Contribution margin per unit = Selling price per unit - Variable cost per unit
Variable cost per unit = Direct materials + Direct labor + Variable overhead
Variable cost per unit = $88 + $36 + $29
Variable cost per unit = $153
Contribution margin per unit = $220 - $153
Contribution margin per unit = $67
Contribution margin for 4,000 units = $67 x 4,000 = $268,000
Therefore, the current contribution margin per unit for component P06 is $67 and the best choice is C.

Younes Incorporated Manufactures Industrial Components