Krepps Corporation produces a single product. Last year, Krepps manufactured 27,

Question

Krepps Corporation produces a single product. Last year, Krepps manufactured 27,540 units and sold 22,200 units. Production costs for the year were as follows: Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead $214,812 $121,176 $239,598 $302,940 Sales totaled $1,098,900 for the year, variable selling and administrative expenses totaled $115,440, and fixed selling and administrative expenses totaled $176,256. There was no beginning inventory. Assume that direct labor is a variable cost. The contribution margin per unit was:

Explanation / Answer

Variable expenses per unit:

Selling price per unit = $1,098,900 ÷ 22,200 units = $49.50 per unit

Unit CM = Selling price per unit – Variable expenses per unit

= $49.50 per unit – $26.10 per unit = $23.40 per unit

Direct materials ($214,812 ÷ 27,540 units produced) $7.80 Direct labor ($121,176 ÷ 27,540 units produced) $4.40 Variable manufacturing overhead ($239,598 ÷ 27,540 units produced) $8.70 Variable selling expenses ($115,440 ÷ 22,200 units sold) $5.20 Total variable expenses $26.10

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