Variable Costs, Contribution Margin, Contribution Margin Ratio Super-Tees Compan
ID: 2415624 • Letter: V
Question
Variable Costs, Contribution Margin, Contribution Margin Ratio
Super-Tees Company plans to sell 18,000 T-shirts at $21 each in the coming year. Product costs include:
Direct materials per T-shirt
$7.35
Direct labor per T-shirt
$1.47
Variable overhead per T-shirt
$0.63
Total fixed factory overhead
$45,000
Variable selling expense is the redemption of a coupon, which averages $1.05 per T-shirt; fixed selling and administrative expenses total $17,000.
Required:
1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to three decimal places (express the ratio as a decimal rather than a percentage).
a. Variable product cost per unit
$
b. Total variable cost per unit
$
c. Contribution margin per unit
$
d. Contribution margin ratio
e. Total fixed expense for the year
$
Direct materials per T-shirt
$7.35
Direct labor per T-shirt
$1.47
Variable overhead per T-shirt
$0.63
Total fixed factory overhead
$45,000
Explanation / Answer
a. Variable product cost per unit= 7.35+1.47+0.63= $9.45
b. Total variable cost per unit=9.45+1.05=$10.50
c. Contribution margin per unit=21-10.50=$10.50
d. Contribution margin ratio=10.50/21= 50%
e. Total fixed expense for the year=45000+17000=$62000
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