Question

The following annual per unit cost data at an activity level of 10,000 units has been provided below. The company produces and sells only one product:

$ per unit

Sales. 150.00

Direct labor. 15.00

Direct material. 18.00

Variable manufacturing

Overhead. 7.50

Fixed manufacturing

Overhead. 50.00

Variable selling expenses. 1.50

Fixed selling expenses. 40

Fixed administrative

Expenses. 15

The relevant range is 8000-13000 units. You will be given facts for three different options. Using the facts given, calculate amounts as directed below. Take each option independent of the others (start with original information given for each).

You must enter your answer in the following format: $x,xxx

The company is also considering an approach that will not alter sales price. The company believes that by laying off non-productive workers they can reduce direct labor to 9% of sales. Combined with a $5,000 increase in advertising per month, they estimate sales will increase 5% over current sales. Calculate the following:

Total sales revenue:______

Total contribution margin:______

Total fixed expenses:______

Answer 1

Number of Units Sold (a)	10,000
Selling price per unit (b)	$150
Total Sales Revenue (a*b)	$1,500,000
Revised Total Sales Revenue ($1,500,000*105/100)	$1,575,000
Variable Cost per Unit:
Direct Labor	$15
Direct Material	$18
Variable Manufacturing Overhead	$7.50
Variable Selling expenses	$1.50
Total Variable Cost per Unit (c )	$42
Number of Units Sold (a)	10,000
Total Variable Costs (a*c)	$420,000
Total Sales Revenue	$1,500,000
Less: Total Variable Costs	($420,000)
Total Contribution Margin	$1,080,000
Fixed Cost per Unit:
Fixed Manufacturing Overhead	$50
Fixed Selling Expense	$40
Fixed Administrative Expense	$15
Total Fixed Cost Per Unit (e )	$105
Number of Units Sold (a)	10,000
Total Fixed Cost (a*e)	$1,050,000
Revised Total Fixed Cost ($1,050,000 + $5,000)	$1,055,000