Question

Northern Star sells several products. Information of average revenue and costs is as follows: Selling price per unit $20.00 Variable costs per unit: Direct material $4.00 Direct manufacturing labor $1.60 Manufacturing overhead $0.40 Selling costs $2.00 Annual fixed costs $96,000 The company sells 12,000 units at the end of the year. The contribution margin per unit is ________.

Answer 1

Computation of Variable cost per unit:

Particulars	Amount($)
a.Direct Material	4.00
b.Direct manufacturing labor	1.60
c.Manufacturing overhead	0.40
d.Selling costs	2
Total Variable cost(a+b+c+d)	8

Contribution Margin per unit = Selling price – Total Variable Cost

                = $(20 - 8)

=$12 per unit

Total margin for 12000 units = Units * Contribution Margin per unit

=12000 units*$12=$144000