Variable Costs, Contribution Margin, Contribution Margin Ratio Super-Tees Compan

Question

Variable Costs, Contribution Margin, Contribution Margin Ratio

Super-Tees Company plans to sell 12,000 T-shirts at $16 each in the coming year. Product costs include:

Variable selling expense is the redemption of a coupon, which averages $0.80 per T-shirt; fixed selling and administrative expenses total $19,000.

Required:

1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to three decimal places.

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2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.

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3. What if the per unit selling expense increased from $0.80 to $1.75? Calculate new values for the following:
Round dollar amounts to the nearest cent and round ratio values to four decimal places:

Direct materials per T-shirt $5.75 Direct labor per T-shirt $1.25 Variable overhead per T-shirt $0.60 Total fixed factory overhead $43,000

Explanation / Answer

1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to three decimal places.

2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.

3. What if the per unit selling expense increased from $0.80 to $1.75? Calculate new values for the following:
Round dollar amounts to the nearest cent and round ratio values to four decimal places:

a. Variable product cost per unit 7.60 b. Total variable cost per unit 8.40 c. contribution margin per unit 7.60 d. Contribution margin ratio 47.5% e. Total fixed expenses for the year 62000

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