Variable Costs, Contribution Margin, Contribution Margin Ratio
Super-Tees Company plans to sell 13,000 T-shirts at $18 each in the coming year. Product costs include:
| Direct materials per T-shirt | $6.30 |
| Direct labor per T-shirt | $1.26 |
| Variable overhead per T-shirt | $0.54 |
| Total fixed factory overhead | $37,000 |
Variable selling expense is the redemption of a coupon, which averages $0.90 per T-shirt; fixed selling and administrative expenses total $17,000.
Required:
1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to
three decimal places (express the ratio as a decimal rather than a
percentage).
| a. Variable product cost per unit | $ |
| b. Total variable cost per unit | $ |
| c. Contribution margin per unit | $ |
| d. Contribution margin ratio | |
| e. Total fixed expense for the year | $ |
2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.
| Super-Tees Company | ||
| Contribution-Margin-Based Operating Income Statement | ||
| For the Coming Year | ||
| Total | Per Unit | |
| $ | $ | |
| $ | $ | |
| $ | ||
3. What if the per
unit selling expense increased from $0.90 to $1.95? Calculate new
values for the following:
Round dollar amounts to the nearest cent and round ratio values to
four decimal places (express the ratio as a decimal rather than a
percentage):
| a. Variable product cost per unit | $ |
| b. Total variable cost per unit | $ |
| c. Contribution margin per unit | $ |
| d. Contribution margin ratio | |
| e. Total fixed expense for the year | $ |
1) calculate following :
| a. Variable product cost per unit (6.30+1.26+0.54) | 8.10 |
| b. Total variable cost per unit (8.10+0.90) | 9.00 |
| c. Contribution margin per unit (18-9) | 9.00 |
| d. Contribution margin ratio (9*100/18) | 50% |
| e. Total fixed expense for the year (37000+17000) | 54000 |
2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year.
| Total | Per unit | |
| Sales | 234000 | 18 |
| Variable cost | 117000 | 9 |
| Contribution margin | 117000 | 9 |
| Fixed cost | 54000 | |
| Net operating income | 63000 | |
1) calculate following :
| a. Variable product cost per unit (6.30+1.26+0.54) | 8.10 |
| b. Total variable cost per unit (8.10+1.95) | 10.05 |
| c. Contribution margin per unit (18-10.05) | 7.95 |
| d. Contribution margin ratio (7.95*100/18) | 44.1667% |
| e. Total fixed expense for the year (37000+17000) | 54000 |
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