Anders Supply experienced the following costs in May: $\begin{array}{ll}
\text { Direct materials } & \$ 6.50 \text { per unit } \
\text { Direct labor } & \$ 2.20 \text { per unit } \
\text { Manufacturing overhead costs } &\
\text { Variable } & \$ 3.10 \text { per unit } \
\text { Fixed } & \$ 44,000\
\text { Selling \& administrative costs }\
\text { Variable selling costs } & \$ 1.50 \text { per unit } \
\text { Fixed selling costs } & \$ 21,000 \
\text { Fixed admini strative costs } & \$ 16,000
\end{array}$ During May, the company manufactured 22,000 units and sold 24,000 units. Beginning inventory totaled 3,400 units. If the average selling price per unit was $28, how much is the company's contribution margin?

Question

Quizplus · Accepted Answer

The contribution margin is calculated as (Selling Price - Variable Costs) * Units Sold. Variable costs per unit are $6.50 (materials) + $2.20 (labor) + $3.10 (manufacturing overhead) + $1.50 (selling) = $13.30. Contribution margin per unit is $28 - $13.30 = $14.70. For 24,000 units sold, the contribution margin is $14.70 * 24,000 = $352,800.

Anders Supply Experienced the Following Costs in May During May, the Company Manufactured 22,000 Units and Sold 24,000