Estrada Corporation produced 212,000 watches that it sold for $16 each during 2019. The company determined that fixed manufacturing cost per unit was $8 per watch. The company reported a $636,000 gross margin on its 2019 financial statements.
Determine the variable cost per unit, the total variable cost, and the total contribution margin.
Sales-Cost of goods sold=Gross margin
Sales=212,000*$16=$3,392,000
Cost of goods sold=$3,292,000-$636,000
Cost of goods sold=$2,756,000
Total cost of goods sold=Fixed cost+Variable cost
Fixed cost=212,000*$8
Fixed cost=$1,696,000
Variable cost=$2,756,000-$1,696,000
Variable cost=$1,060,000
Variable cost per unit=Total variable cost/number of units
Variable cost per unit=$1,060,000/212,000
Variable cost per unit=$5
Total contribution margin=Sales-Variable cost
Total contribution margin=$3,392,000-$1,060,000
Total contribution margin=$2,332,000
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