Macy Corporation\'s relevant range of activity is 8,700 units to 17,500 units. W

Question

Macy Corporation's relevant range of activity is 8,700 units to 17,500 units. When it produces and sells 13,100 units, its average costs per unit are as follows:

If the selling price is $33.00 per unit, the contribution margin per unit sold is closest to:

Multiple Choice

$11.70

$7.50

$23.35

$19.45

Average Cost per Unit Direct materials $ 5.60 Direct labor $ 4.05 Variable manufacturing overhead $ 2.05 Fixed manufacturing overhead $ 3.80 Fixed selling expense $ 1.35 Fixed administrative expense $ 0.65 Sales commissions $ 1.30 Variable administrative expense $ 0.55

Explanation / Answer

Answer:

the contribution margin per unit sold is closest to:$19.45

Working notes for the above answer is as under

First we need to find out the total variable cost as under

Average Cost
per Unit

Direct materials

5.6

Direct labor

4.05

Variable manufacturing overhead

2.05

Sales commissions

1.3

Variable administrative expense

0.55

Total Variable cost

13.55

Sales

33

Less: variable cost

13.55

Contribution margin

19.45

Average Cost
per Unit

Direct materials

5.6

Direct labor

4.05

Variable manufacturing overhead

2.05

Sales commissions

1.3

Variable administrative expense

0.55

Total Variable cost

13.55

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