Question

Question 2: Morrisroe Corporation has provided the following information: Cost per UnisCost per Period $765 Direct materials Direct labor 4.30 Variable manufacturing overhead Fixed manufacturing overhead Sales commissions $1.50 $1,000 S1.50 Variable administrative expense S1.00 Fixed selling and administrative expense $5,00 Required a. If the selling price is $35 per unit, what is the contribution margin per unit sold? (2 marks) b. What incremental manufacturing cost will the company incur if it increases production from 5,000 to 5,010 units? (2 marks) 3) Fanelli Corporation, a merchandising company, reported the following results for July: Number of units sold 5,600 Selling price per unit Unit cost of goods sold Variable selling expense per unit Total fixed selling expense Variable administrative expense per unit Total fixed administrative expense S650 $455 S6 $122,500 $23 S206,400 Cost of goods sold is a variable cost in this company. Required: Prepare a contribution format income statement for July. (2 marks)

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Answer 1

a.calculation of contribution margin per unit sold:

sales price per unit	$35.00
less: variable expenses
direct materials	(7.65)
direct labor	(4.30)
variable manufacturing overhead	(1.50)
sales commission	(1.50)
variable administrative expense	(1.00)
contribution margin per unit sold	$19.05

b.

incremental manufacturing cost for 10 additional units:

direct materials ($7.65*10 units)	76.50
direct labor (4.30*10)	43.00
variable manufacturing overhead (1.50*10)	15.00
incremental manufacturing cost	$134.50

3.

contribution format income statment:

sales revenue (5600*$650)		3,640,000
less: variable costs
unit costs of goods sold ($455*5600)	2,548,000
variable selling expense ($61*5600)	341,600
variable administrative expense ($23*5600)	128,800	(3,018,400)
contribution margin		621,600
less: fixed costs
fixed selling expense	(122,500)
fixed administrative expense	(206,400)	(328,900)
net income		292,700