Stanley's Candies is considering building a new plant in Europe.It predicts sales at the new plant to be 40,000 units at $4.00/unit.Below is a listing of estimated expenses.

A European firm was contracted to sell the product and will receive a commission of 10% of the sales price.No U.S.home office expenses will be allocated to the new facility.
The contribution margin ratio for Stanley's Candies is

Question

Stanley's Candies is considering building a new plant in Europe.It predicts sales at the new plant to be 40,000 units at $4.00/unit.Below is a listing of estimated expenses.

A European firm was contracted to sell the product and will receive a commission of 10% of the sales price.No U.S.home office expenses will be allocated to the new facility.
The contribution margin ratio for Stanley's Candies is

Quizplus · Accepted Answer

C)
Category Total Exps %Fixed Total fixed Total Variable
Materials $20,000 10% 2,000 18,000
Labor $30,000 20% 6,000 24,000
Overhead $50,000 40% 20,000 30,000
Market/Admin $10,000 60% 6,000 4,000
Sub Total 110,000 34,000 76,000
Commissions ( 40,000 units × $4.00 ×10 %)16,000
Total expense 34,000 92,000
Contribution margin Sales 160,000 (40,000 units × $4)
Variable expense 92,000
Contribution margin 68,000
Percentage 42.5% (68,000 / 160,000)

Stanley's Candies Is Considering Building a New Plant in Europe