TDockwiller Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as D53. Data concerning this product are given below:

The above per unit data are based on annual production of 8,000 units of the component. Direct labor is a variable cost
-Refer to the original data in the problem. What is the current contribution margin per unit for component D53 based on its selling price of $150 and its annual production of 8,000 units?
A)$83 per unit
B)$118 per unit
C)$32 per unit
D)$120 per unit

Question

TDockwiller Inc. manufactures industrial components. One of its products, which is used in the construction of industrial air conditioners, is known as D53. Data concerning this product are given below:

The above per unit data are based on annual production of 8,000 units of the component. Direct labor is a variable cost
-Refer to the original data in the problem. What is the current contribution margin per unit for component D53 based on its selling price of $150 and its annual production of 8,000 units?
A)$83 per unit 
B)$118 per unit 
C)$32 per unit 
D)$120 per unit

Quizplus · Accepted Answer

The contribution margin per unit for component D53 can be calculated as follows:
Selling price per unit = $150
Variable cost per unit = Direct materials cost + Direct labor cost + Variable manufacturing overhead
= $44 + $25 + $3
= $72
Contribution margin per unit = Selling price per unit - Variable cost per unit
= $150 - $72
= $78
Contribution margin for 8,000 units = Contribution margin per unit x Number of units
= $78 x 8,000
= $624,000
Therefore, the current contribution margin per unit for component D53 is $78 and the best choice is B.