Question

Estrada Corporation produced 212,000 watches that it sold for $16 each during 2019. The company determined...

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.

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Answer #1

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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