Question

Kogler Corporation's relevant range of activity is 7,000 units to 11,000 units. When it produces and sells 9,000 units, its average costs per unit are as follows:

	Average Cost per Unit
Direct materials	$	4.85
Direct labor	$	4.20
Variable manufacturing overhead	$	1.55
Fixed manufacturing overhead	$	9.00
Fixed selling expense	$	3.15
Fixed administrative expense	$	1.80
Sales commissions	$	0.50
Variable administrative expense	$	0.45

If the selling price is $25.00 per unit, the contribution margin per unit sold is closest to:

Multiple Choice

• $13.45

• ($0.50)

• $5.40

• $15.95

Answer 1

Answer is $13.45

Variable cost per unit = Direct materials per unit + Direct labor per unit + Variable manufacturing overhead per unit + Sales commissions per unit + Variable administrative expense per unit
Variable cost per unit = $4.85 + $4.20 + $1.55 + $0.50 + $0.45
Variable cost per unit = $11.55

Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $25.00 - $11.55
Contribution margin per unit = $13.45