Question

18 Which of the following costs is a period cost for a manufacturing company? a. Controller's salary b. wages of machine operators c. insurance on factory equipment d. fringe benefits for factory employees Blazin-Boards Company plans to sell 10,000 snowboards at $400 each in the coming year. Product costs include: Direct Materials per snowboard $80 Direct Labor per snowboard $125 Variable overhead per snowboard $15 Total fixed factory overhead $800,000 Variable selling expense is a commission of 5% of sales price. Fixed selling & administrative expenses total $400,000. Calculate the: 19. Variable product cost per unit 20. Selling expense per unit 21. Total variable cost per unit 22. Contribution margin per unit 23. Contribution margin ratio 24. How many snowboards must Blazin-Boards sell to break even?

Answer 1

Answer - (D) fringe benefits for factory employees because they are administrative expenses.

Solution to the question -

Rate (In S) Amount (in $) Particulars Units 10000 4000000 Sell 400 Product costs Per unit Value Direct material 80 Direct labor 125 Variable overhead 15 Fixed expenses Variable selling expense Fixed selling & admn exp 800000 200000 400000 1 Variable product cost per unit Direct material Direct labor Variable overhead Total variable product cost/unit 80 125 15 220 2 Selling expenses per unit Variable selling expense Fixed selling& admn exp Total Selling expenses per unit 200000/10000 400000/10000 20 40 60 Note In this case fixed cost is considered for 10000 snowboards only 3 Total varible cost per unit Direct material 80 Direct labor 125 Variable overhead Variable selling expense Total variable cost/unit 15 200000/10000 20 240 4 Contribution margin per unit Sales Less-Variable cost Contribution margin per unit 400 240 160 5 Contribution margin ratio Contribution per unit/sale per unit 160/400 100 100 Contribution margin ratio 40% 6 Break even point Fixed Cost/Contribution per unit (800000+400000)/160 Break even units 7500