Date Company makes calendars. Information on cost per unit is as follows:
Fixed marketing expense totalled $13,000, and fixed administrative expense totalled $35,000. The price per calendar is $10.
$\begin{array}{lr}
\text { Direct materials } & \$ 1.50 \
\text { Direct labour } & 1.20 \
\text { Variable overhead } & 0.90 \
\text { Variable marketing expense } & 0.40
\end{array}$
-Refer to the Figure.What is the contribution margin per unit?
A)$5.00
B)$5.40
C)$6.00
D)$6.30

Question

Date Company makes calendars. Information on cost per unit is as follows:
Fixed marketing expense totalled $13,000, and fixed administrative expense totalled $35,000. The price per calendar is $10.
 $\begin{array}{lr}
\text { Direct materials } & \$ 1.50 \
\text { Direct labour } & 1.20 \
\text { Variable overhead } & 0.90 \
\text { Variable marketing expense } & 0.40
\end{array}$
-Refer to the Figure.What is the contribution margin per unit?
A)$5.00
B)$5.40
C)$6.00
D)$6.30

Quizplus · Accepted Answer

The contribution margin per unit is calculated by subtracting all variable costs from the selling price per unit. Here, the variable costs include direct materials ($1.50), direct labor ($1.20), variable overhead ($0.90), and variable marketing expense ($0.40), totaling $4.00. Subtracting this from the selling price of $10 gives a contribution margin of $6.00 per unit. However, the correct calculation should include all variable costs from the selling price, which I mistakenly summed up to $4.00 instead of the correct total variable costs. The correct total variable costs are $1.50 (direct materials) + $1.20 (direct labor) + $0.90 (variable overhead) + $0.40 (variable marketing expense) = $4.00. Subtracting this from the selling price of $10 indeed gives a contribution margin of $6.00 per unit, not $6.30. My initial instruction to subtract all variable costs from the selling price was correct, but the final answer provided was incorrect due to a miscalculation. The correct answer, based on the provided calculation, should be $6.00 per unit, not $6.30.

Date Company Makes Calendars -Refer to the Figure