Question

Pedregon Corporation has provided the following information:

	Cost per Unit			Cost per Period
Direct materials	$	6.50
Direct labor	$	3.40
Variable manufacturing overhead	$	1.30
Fixed manufacturing overhead				$	18,700
Sales commissions	$	0.50
Variable administrative expense	$	0.55
Fixed selling and administrative expense				$	5,200

If the selling price is $20.40 per unit, the contribution margin per unit sold is closest to:

Answer 1

Answer

Computation of Contribution margin per unit
Contribution margin per unit = Selling Price - Variable Cost per unit
Step 1- Computation of Variable Cost per unit
Particulars	Variable Cost
Direct Materials	$6.50
Direct Labour	$3.40
Variable Manufacturing OH	$1.30
Sales Commission	$0.50
Variable Admin OH	$0.55
Total	$12.25
Step2- Computation of Contribution margin per unit
Particulars	Amount
Selling Price	$20.40
Less: Variable Cost per unit	$12.25
Contribution per unit	$8.15

Please let me know if you require any further clarifications. I am happy to help you. Kindly give me a feedback.

Thank you,