Question

The following data apply to the provision of psychological testing services: Sales price per unit (1 unit = 1 test plus feedback to client) Fixed costs (per month): Selling and administration Production overhead (e.g., rent of testing facilities) Variable costs (per test): Labor for oversight and feedback Outsourced test analysis Materials used in testing Production overhead Selling and administration (e.g., scheduling and billing) Number of tests per month 340 16,000 20,000 145 25 17 2,000 tests Required: Calculate the amount for each of the following (one unit = one test) if the number of tests is 2,000 per month. Also calculate if the number of tests decreases to 1,250 per month. (Do not round intermediate calculations. Round your final answers to the nearest whole dollar.) 2,000 Tests 1,250 Tests Variable production cost per unit. 182 $ 182 a. Variable cost per unit. 199 $ 199 b. Full cost per unit. 397 C. Full absorption cost per unit. Prime cost per unit. e. Conversion cost per unit. f. Contribution margin per unit. g. Gross margin per unit.

Answer 1

		2,000 Tests	1,250 Tests
	Variable production cost per unit	$182	$182
	Variable cost per unit	$199	$199
	Full cost per unit	$217	$228
	Full absorption cost per unit	$192	$198
	Prime cost per unit	$176	$176
	Conversion cost per unit	$186	$192
	Contribution margin per unit	$141	$141
	Gross margin per unit	$148	$142
	*Working Notes:
	Calculations for Variable production cost per unit :
		2,000 Tests	1,250 Tests
	Labor for oversight and feedback	$145	$145
	Outsourced test analysis	$25	$25
	Materials used in testing	$6	$6
	Production overhead	$6	$6
	Total variable production cost per unit	$182	$182
	Calculations for Variable cost per unit :
		2,000 Tests	1,250 Tests
	Variable production cost per unit	$182	$182
	Variable Selling and administration	$17	$17
	Total variable cost per unit	$199	$199
	Fixed overhead cost per unit = Fixed overhead / Number of Tests
		2,000 Tests	1,250 Tests
	Fixed overhead cost per unit	$20,000 / 2,000	$20,000 / 1,250
		$10	$16
	Fixed selling and administraitve cost per unit = Fixed selling and administraitve cost / Number of Tests
		2,000 Tests	1,250 Tests
	Fixed selling and administraitve cost per unit	$16,000 / 2,000	$16,000 / 1,250
		$8	$13
	Calculations for Full cost per unit :
		2,000 Tests	1,250 Tests
	Total variable cost per unit	$199	$199
	Fixed overhead cost per unit	$10	$16
	Fixed selling and administraitve cost per unit	$8	$13
	Full cost per unit	$217	$228
	Calculations for Variable cost per unit :
		2,000 Tests	1,250 Tests
	Variable production cost per unit	$182	$182
	Fixed overhead cost per unit	$10	$16
	Full absorption cost per unit	$192	$198
	Calculations for Prime cost per unit :
		2,000 Tests	1,250 Tests
	Labor for oversight and feedback	$145	$145
	Outsourced test analysis	$25	$25
	Materials used in testing	$6	$6
	Total variable production cost per unit	$176	$176
	Calculations for Conversion cost per unit :
		2,000 Tests	1,250 Tests
	Labor for oversight and feedback	$145	$145
	Outsourced test analysis	$25	$25
	Variable Production overhead	$6	$6
	Fixed overhead cost per unit	$10	$16
	Total variable production cost per unit	$186	$192
	Calculations for Contribution margin per unit :
		2,000 Tests	1,250 Tests
	Selling price per unit	$340	$340
	Less: Total variable cost per unit	-$199	-$199
	Contribution margin per unit	$141	$141
	Calculations for Gross margin per unit :
		2,000 Tests	1,250 Tests
	Selling price per unit	$340	$340
	Less: Full absorption cost per unit	-$192	-$198
	Contribution margin per unit	$148	$142