Exercise 2-27 Basic Concepts (LO 2-1, 2, 6) Calculate the amount for each of the
ID: 2420048 • Letter: E
Question
Exercise 2-27 Basic Concepts (LO 2-1, 2, 6)
Calculate the amount for each of the following (one unit = one test) if the number of tests is 500 per month. Also calculate if the number of tests decreases to 400 per month.
A. VARIABLE PRODUCTION COST PER UNIT
B. VARIABLE COST PER UNIT
C. FULL COST PER UNIT
D. FULL ABSORPTION COST PER UNIT
E. PRME COST PER UNIT
F. CONVERSION MARGIN PER UNIT
G. CONTRIBUTION MARGIN PER UNIT
H. GROSS MARGIN PER UNIT
The following data apply to the provision of psychological testing services.Explanation / Answer
500 units 400 units Labor for oversight and feedback $140 140 Outsourced test analysis 22 22 Materials used in testing 7 7 Production overhead 15 15 Selling and administration (e.g., scheduling and billing) 12 12 B) Variable Cost per unit 196 196 Less: Selling and administration (e.g., scheduling and billing) 12 12 A) Variable Production Cost per Unit 184 184 Selling and administration 32 40 Production overhead (e.g., rent of testing facilities) 32 40 C Full Absorption Cost per unit 248 264 E Prime Cost 140+22+7 169 169 Convsersion Cost 15+12 27 27 F Conversion Margin 320-27 293 293 G Contribution Margin perunit 320-196 124 124 E Gross Margin per unit 500 units124-32-32 400 units 124-40-40 60 44
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