Perez Corporation produced 214,000 watches that it sold for $20 each during year 2. The company...
Perez Corporation produced 214,000 watches that it sold for $20 each during year 2. The company determined that fixed manufacturing cost per unit was $9 per watch. The company reported a $1,070,000 gross margin on its year 2 financial statements.
Required
Determine the variable cost per unit, the total variable cost, and the total contribution margin.
Perez Corporation produced 214,000 watches that it sold for $20 each during year 2. The company determined that fixed manufacturing cost per unit was $9 per watch. The company reported a $1,070,000 gross margin on its year 2 financial statements.
Required
Determine the variable cost per unit,
the total variable cost,
and the total contribution margin.
Homework Answers
| Ans. 1 | Variable cost per unit = Selling price per unit - Fixed cost per unit - Gross margin per unit | |||
| $20 - $9 - $5 | ||||
| $6 per unit | ||||
| *Gross margin per unit = Gross margin / Units sold | ||||
| $1,070,000 / 214,000 | ||||
| $5 per unit | ||||
| Ans. 2 | Total variable cost = Variable cost per unit * Units sold | |||
| $6 * 214,000 | ||||
| $1,284,000 | ||||
| Ans. 3 | Total contribution margin = Units sold * (Selling price per unit - Variable cost per unit) | |||
| 214,000 * ($20 - $6) | ||||
| 214,000 * $14 | ||||
| $2,996,000 | ||||
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