Question

A company's product sells at $12.20 per unit and has a $5.30 per unit variable cost. The company's total fixed costs are $97,000. The contribution margin per unit is:

Multiple Choice

• $17.50.

• $6.90.

• $5.30.

• $12.20.

• $8.07.
  

  Brush Industries reports the following information for May:
  

  Sales	$	910,000
  Fixed cost of goods sold		102,000
  Variable cost of goods sold		252,000
  Fixed selling and administrative costs		102,000
  Variable selling and administrative costs		127,000

  
  Calculate the operating income for May under absorption costing.

  Multiple Choice

• $658,000

• $327,000

• $531,000

• $556,000

• $354,000

Answer 1

Solution :

Answer (1) : The Answer is (b) $ 6.90.

Answer (2) : The Answer is (b) $ 327,000.

Working :

(1) Contribution Margin per Unit = Sales Price per Unit - Variable Cost per Unit

= $ 12.20 - $ 5.30

= $ 6.90

(2) Profit Under Absorption Costing :

Sales	$ 910,000
Cost of Goods Sold :
Variable Cost of Goods Sold	$ 252,000
Fixed Cost of Goods Sold	$ 102,000
Gross Profit	$ 556,000
Selling and Administrative OH :
Variable Selling and Administrative Costs	$ 127,000
Fixed Selling and Administrative Costs	$ 102,000
Operating Income	$ 327,000

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