Question

Intercontinental, Inc., provides you with the following data for its single product: $ 50.00 1,800,000 1,800,000 Sales price per unit Fixed costs (per month): Selling, general, and administrative (SG&A) Manufacturing overhead Variable costs (per unit): Direct labor Direct materials Manufacturing overhead SG&A Number of units produced per month 7.00 12.00 10.00 5.00 300,000 units Required: Compute the amounts for each of the following assuming that both production levels are within the relevant range. (Do not round intermediate calculations. Round your answers to 2 decimal places.) Answer is complete but not entirely correct. units a. b. c. Prime cost per unit. Contribution margin per unit. Gross margin per unit. Conversion cost per unit. Variable cost per unit. Full absorption cost per unit. Variable production cost per unit. Full cost per unit. $ $ $ $ $ $ $ $ 300,000 400,000 units 21.00 $ 21.00 16.00 $ 16.00 16.50 $ 16.50 28.00 Ⓡ$ 26.50 35.00 $ 35.00 36.00 $ 34.50 30.00 $ 30.00 47.00 $ 44.00 h.

Answer 1

1.

		300,000 units	400,000 units
a.	Prime cost per unit	$          19.00	$    19.00
	(direct material + Direct labor = 12 + 7)
b	Contribution margin per unit (sales - variable cost = 50 - 7 - 12 - 10 - 5)	$          16.00	$    16.00
c	Gross margin per unit ($50 – full absorption cost )	$          15.00	$    16.50
d	Conversion cost per unit (direct labor + overhead cost)	$          23.00	$    21.50
	300,000units = ($7 + $10 + ($1,800,000 ÷ 300,000))
	400,000units = ($7 + $10 + ($1,800,000 ÷ 400,000))
e	Variable cost per unit (7+12+10+5)	$          34.00	$    34.00
f	Full absorption cost per unit (Variable production cost per unit + fixed Manufacturing overhead cost / units produced)	$          35.00	$    33.50
	300,000 units = 29 + 1,800,000 / 300,000 = 29 + 6 = 35
	400,000 units = 29 + 1,800,000 / 400,000 = 29 + 4.5 = 33.50
g	Variable production cost per unit (direct labor + direct material + manufacturing overhead = 7+12+10)	$          29.00	$    29.00
h	Full cost per unit ( variable cost + fixed cost)	$          46.00	$    43.00
	300,000 units = 34 +3,600,000 / 300,000 = 34 + 12.00 = 46.00
	400,000 units = 34 + 3,600,000 / 400,000 = 34 + 12.00 = 43.00

2. a.

1	Total Variable Manufacturing Cost per Unit	$    63.00
2	Full Cost per Unit	$    93.00
3	Total Variable Cost per Unit	$    67.00
4	Full Absorption Cost per Unit	$    74.00
5	Prime Cost per Unit	$    41.00
6	Total Prime Cost per Unit	$    41.00
7	Profit Margin per Unit	$    39.00
8	Contribution margin per Unit	$    65.00
9	Gross Margin Per unit	$    58.00

Working:

Answer 1.
Direct Labor	$            8.00
Direct Material	$          33.00
Variable Overhead	$          22.00
Total Variable Manufacturing Cost per Unit	$          63.00
Answer 2.
Variable Manufacturing Cost
Direct Labor	$            8.00
Direct Material	$          33.00
Variable Overhead	$          22.00
Fixed Manufacturing Costs
Fixed Overhead - $13,200 / 1,200 Units	$          11.00
Marketing and administrative Costs
Fixed Cost - $18,000 / 1,200 Units	$          15.00
Variable Cost	$            4.00
Full Cost per Unit	$          93.00
Answer 3.
Variable Manufacturing Cost
Direct Labor	$            8.00
Direct Material	$          33.00
Variable Overhead	$          22.00
Variable Marketing & Admn. Costs	$            4.00
Total Variable Cost per Unit	$          67.00
Answer 4.
Variable Manufacturing Cost
Direct Labor	$            8.00
Direct Material	$          33.00
Variable Overhead	$          22.00
Fixed Manufacturing Costs
Fixed Overhead - $13,200 / 1,200 Units	$          11.00
Full Absorption Cost per Unit	$          74.00
Answer 5.
Direct Labor	$            8.00
Direct Material	$          33.00
Prime Cost per Unit	$          41.00
Answer 6.
Variable Manufacturing Cost
Direct Labor	$            8.00
Variable Overhead	$          22.00
Fixed Manufacturing Costs
Fixed Overhead - $13,200 / 1,200 Units	$          11.00
Total Prime Cost per Unit	$          41.00
Answer 7.
Sales Price per Unit	$        132.00
Less: Full Cost per Unit	$          93.00
Profit Margin per Unit	$          39.00
Answer 8.
Sales Price per Unit	$        132.00
Less: Variable Cost per Unit	$          67.00
Contribution margin per Unit	$          65.00
Answer 9.
Sales Price per Unit	$        132.00
Less: Absorption Cost per Unit	$          74.00
Gross Margin Per unit	$          58.00