Question

Ayers, Inc has the following cost data for Product X and unit product cost using variable costing when production is 200 units 500 units, and 1.000 units (Click on the icon to view the data) (Click on the icon to view the unit product cost data) Product X sells for $169 per unit Assume no beginning inventories Calculate the contribution margin using variable casting when Ayers a. Produces and sells 200 units b. Produces 500 units and sells 200 units c. Produces 1.000 units and sells 200 units Begin by selecting the labels and computing the contribution margin for scenario a and then compute the contribution margin for scenario bande Variable costing Direct Materials Data Table Die Labor Contribution Margin 54 per unit Direct materials Direct labor Variable manufacturing overhead Fored manufacturing overhead por un Choose from any list or enter any number in the input fiets and then continue to me ne 10 000 Print Done

Answer 1

Compute the contribution margin under each of the three cases using spreadsheet as follows:

Particulars Case a. Case b. Case c. Units Produced 200 500 1000 Units Sold 200 200 200 Direct materials per unit 42 Direct labor per unit 54 54 Varible manufacturing overhead per unit 8 Fixed manufacturing overhead 10000 10000 10000 Fixed manufacturing overhead per unit 1=C8/C3 -D8/D3 =E8/E3 Total variable cost per unit =C5+C6+C7+C9 =D5+D6+D7+D9 =E5+E6+E7+E9 Selling price per unit 169 169 169 Contribution margin per unit =C11-C10 =D11-D10 =E11-E10 Contribution margin =C12*C4 =D12*D4 =E12*E4

The result of the above spreadsheet is as follows:

Particulars Units Produced Units Sold Direct materials per unit Direct labor per unit Varible manufacturing overhead per unit Fixed manufacturing overhead Fixed manufacturing overhead per unit Total variable cost per unit Selling price per unit Contribution margin per unit Contribution margin Case a. 200 200 $42 $54 $8 $10,000 $50 $154 $169 $15 $3,000 Case b. 500 200 $42 $54 $8 $10,000 $20 $124 $169 $45 $9,000 Case c. 1000 200 $42 $54 $8 $10,000 $10 $114 $169 $55 $11,000

Hence, the contribution margin under case (a) is $3000, under case (b) is $9000 and under case (c) is $11,000.