Intercontinental, Inc., provides you with the following data for its single product: Sales price per unit...

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Answer 1

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	300000 units($)	400000 units($)
Prime cost per unit	19	19
Contribution margin per unit	18	18
Gross margin per unit	14	16.25
Conversion cost per unit	26	23.75
Variable cost per unit	34	34
Full absorption cost per unit	38	35.75
Variable production cost per unit	29(7+12+10)	29(7+12+10)

Prime cost per unit= direct labour per unit + direct material per unit

= 7+ 12=$19

Total varible cost per unit= direct labour per unit+direct material per unit+ variable manufacturing overhead + sg&a per unit

= 7+12+10+ 5= $34

Contribution margin per unit= selling price per unit - variable cost per unit = 52- 34 = $18

Note Since variable cost per unit does not vary with change in number of units, contribution per unit and prime cost per unit will be same for both production levels.

Cost of goods sold per unit= direct labour per unit+ direct material per unit+ variable manufacturing overhead per unit+ fixed manufacturing overhead per unit

For 300000units= 7+12+10+9 (2700000/300000=9)= $38
For 400000units= 7+12+10+6.75 (2700000/400000=6.75)= $35.75

Gross profit margin per unit= selling price per unit- cost of goods sold out unit

For 300000units= 52-38= $14
For 400000units= 52-35.75= $16.25

Conversion cost per unit= direct labour per unit + variable manufacturing overhead per unit+ fixed manufacturing overhead per unit

For 300000units = 7+10+9= $26
For 400000 units= 7+10+ 6.75=$23.75

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Intercontinental, Inc., provides you with the following data for its single product: Sales price per unit...

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