Young Company has provided the following information: Price per unit $40 Variabl
ID: 2395027 • Letter: Y
Question
Young Company has provided the following information:
Price per unit
$40
Variable cost per unit
12
Fixed costs per month
$10,000
What is the contribution margin ratio?
A) 12%
B) 60%
C) 40%
D) 70%
First Buy Company provided the following manufacturing costs for the month of June.
Direct labor cost
$136,000
Direct materials cost
80,000
Equipment depreciation (straight-line)
24,000
Factory insurance
19,000
Factory manager's salary
12,800
Janitor's salary
5,000
Packaging costs
18,800
Property taxes
16,000
From the above information, calculate First Buy's total variable costs.
A) $311,600
B) $62,300
C) $234,800
D) $38,400
Price per unit
$40
Variable cost per unit
12
Fixed costs per month
$10,000
Explanation / Answer
Answers
Unit Contribution = Unit Sale price – Unit Variable Cost
= $ 40 - $ 12 = $ 28
Contribution margin Ratio (CM Ratio) = Unit Contribution / Unit Sales Price
= $ 28 / $ 40 = 0.7
Hence, CM Ratio = 70% [0.7 x 100) = Option D: 70%
Total Variable costs:
Direct labor cost = 136000
Direct Material cost = 80000
Packaging Costs = 18800
Total variable cost = 136000 + 80000 + 18800 = $ 234,800 = Option C: $ 234,800
---Rest are Fixed Costs----
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