Assuming that cost behavior did not change over the two-year period,what is Li Company's contribution margin in Year 2?
A) $33,000
B) $32,000
C) $39,000
D) $69,000

Question

Quizplus · Accepted Answer

Variable cost per unit = Change in costs ÷ Change in activity
Cost of goods sold:
Variable cost per unit = ($68,000 - $60,000)÷ (3,500 units - 3,000 units)= $16.00 per unit
Selling and administrative expense:
Variable cost per unit = ($13,000 - $12,000)÷ (3,500 units - 3,000 units)= $2.00 per unit
Contribution margin in Year 2:
Contribution margin = Sales revenue - Variable costs
Contribution margin = $87,000 - [3,000 units x ($16.00 per unit + $2.00 per unit)]= $33,000

Assuming That Cost Behavior Did Not Change Over the Two-Year