Diego Company manufactures one product that is sold for $80 per unit in two geog

Question

Diego Company manufactures one product that is sold for $80 per unit in two geographic regions—the East and West regions. The following information pertains to the company’s first year of operations in which it produced 51,000 units and sold 47,000 units. Variable costs per unit: Manufacturing: Direct materials $ 30 Direct labor $ 18 Variable manufacturing overhead $ 2 Variable selling and administrative $ 3 Fixed costs per year: Fixed manufacturing overhead $ 816,000 Fixed selling and administrative expenses $ 480,000 The company sold 34,000 units in the East region and 13,000 units in the West region. It determined that $250,000 of its fixed selling and administrative expenses is traceable to the West region, $200,000 is traceable to the East region, and the remaining $30,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. . What is the company’s total contribution margin under variable costing?

Explanation / Answer

Calculate company’s total contribution margin under variable costing :

So company's total contribution margin under variable costing is $1269000

Variable cost per unit Direct material 30 Direct labour 18 Variable manufacturing overhead 2 Variable selling and administrative 3 Total variable cost per unit 53 Sale price per unit 80 Contribution margin per unit 27 Sales unit 47000 Contribution margin 1269000

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