Question

lacob Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $149.00 per unit. Sales volume (units) Cost of sales Selling and administrative costs 15,600 $1,185,600 $ 676,000 17,520 $1,331,520 $ 714,400 The best estimate of the total contribution margin when 15,910 units are sold is: Multiple Choice O $303,570 $843,230 O ennen C

Answer 1

Used high-low method to estimate variable components of the costs: Variable cost of sales = Change in cost/Change in activity = ($1,331,520 - $1,185,600)/(17,520 - 15.600) = $145,920 / 1920 units = $76 Per unit Variable selling and administrative costs = ($714.400 - $676,000)/(17,520 Units - 15.600 Units) = $38.400 / 1.920 units = $20 Per unit Total variable cost per unit = Variable cost of sales + Variable selling and administrative costs = $76 Per unit + $20 Per unit = $96 Per unit Number of units sold = 15,910 Units Sale price per unit = $149 Per unit Contribution margin per unit = Sale price per unit - Total variable cost per unit = $149 Per unit - $96 Per unit = $53 Per unit Total contribution margin = Number of units sold * Contribution margin per unit = 15,910 Units * $53 Per unit = $843,230 Ans : $843,230