Question

Wedder Company sold 10,000 units last year at RM20. Unit costs are as follows: RM Direct...

Wedder Company sold 10,000 units last year at RM20. Unit costs are as follows:
RM
Direct materials 3.90
Direct labor 1.40
Variable factory overhead 2.10
Variable selling and administrative expenses 1.60

Total fixed factory overhead is RM52,000 per year and total fixed selling and administrative expense is RM38,000.

Required:
a) Calculate the contribution margin per unit and contribution ratio.                         

b) Calculate the break-even points (in units and RM).                                                

c) Calculate the units that Wedder must sell in order to earn an operating income of RM20,000.                                                                                                              
(Total: 10 Marks)

Business   Accounting   
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Homework Answers

Answer #1

Answer to Q(a)

Contribution margin per unit : Selling price - Variable cost per unit

= 20-3.90-1.40-2.10-1.60 ; 11.0 Per unit

Contribution Margin Ratio: Contribution margin/Sales *100 ; 11.0/20.0*100 ; 55%

Answer to Q(b)

Break Even Points : Fixed Cost/Contribution Margin unit

; 52,000+38,000/11 ; 8182 Units round off

ANswer to Q(C)

Unit to sell to earn a income of 20,000 ; Fixed Cost + Desired income / Contribution margin

= (52,000+38,000+20,000)/11 ; 10,000 Units

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