Eley Corporation produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 40, 000 units per month is as follows: The normal selling price of the product is $86.10 per unit. An order has been received from an overseas customer for 2, 000 units to be delivered this month at a special discounted price.This order would not change the total amount of the company's fixed costs.The variable selling and administrative expense would be $1.20 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
What is the contribution margin per unit on normal sales?
A)$32.50
B)$8.40
C)$9.70
D)$7.20

Question

Eley Corporation produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 40, 000 units per month is as follows:  The normal selling price of the product is $86.10 per unit. An order has been received from an overseas customer for 2, 000 units to be delivered this month at a special discounted price.This order would not change the total amount of the company's fixed costs.The variable selling and administrative expense would be $1.20 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
What is the contribution margin per unit on normal sales?
A)$32.50 
B)$8.40 
C)$9.70 
D)$7.20

Quizplus · Accepted Answer

The Answer of Eley Corporation produces a single product.The cost of producing and selling a single unit of this product at the company's normal activity level of 40, 000 units per month is as follows:  The normal selling price of the product is $86.10 per unit. An order has been received from an overseas customer for 2, 000 units to be delivered this month at a special discounted price.This order would not change the total amount of the company's fixed costs.The variable selling and administrative expense would be $1.20 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.
What is the contribution margin per unit on normal sales?
A)$32.50 
B)$8.40 
C)$9.70 
D)$7.20

Eley Corporation Produces a Single Product