Question

Category Cost: Rent Monthly , cost $3000, Utilities Monthly $1100, Insurance Quarterly $1200, Property Taxes, annually $6000, Steel per shelf $9.00, forming per shelf $.25, Labor per shelf $.75 Price charged per shelf $20.00

This company has monthly fixed cost of __________ and a contribution margin of ______

$5000, $10

$5000; $20

$11,300; $20

$5800; $10

Answer 1

Cost	Type	Fixed cost per month	Variable cost per shelf
Rent	Fixed cost – Fixed per month irrespective of number of shelves.	$3000	-
Utilities	Fixed cost – Fixed per month irrespective of number of shelves.	$1100	-
Insurance	Fixed cost – Fixed per quarter irrespective of number of shelves. Insurance per month = $1200÷3 months = $400	$400	-
Property taxes	Fixed cost – Fixed per annum irrespective of number of shelves. Property taxes per month = $6000÷12 months = $500	$500	-
Steel (material)	Variable cost – Incurred per unit of shelf made.	-	$9
Forming	Variable cost – Incurred per unit of shelf made.	-	$0.25
Labor	Variable cost – Incurred per unit of shelf made.	-	$0.75
Total		$5000	$10

Total fixed costs per month = $5000

Contribution margin = selling price - variable cost per unit = $20 - $10 = $10