11) in 2016: Sales, 5,000 units @ $10 each Total production, 7,500 units Selling

Question

11) in 2016:             Sales, 5,000 units @ $10 each             Total production, 7,500 units             Selling and administrative costs:          Fixed                  $1,000                      Variable                       $1 per unit             Production costs per unit:          Direct materials            $2.00                      Direct labor                   $2.00                      Variable overhead        $1.00             Fixed manufacturing overhead       $7,500 Alpha Company uses direct (variable) costing. Use this information to determine for Alpha Company the FY 2016: (Round & enter final answers to: the nearest whole dollar for total dollar answers, nearest penny for unit costs or nearest whole number for units) 1. Contribution Margin 2. Net Income 3. Cost of Ending Inventory

Explanation / Answer

Under Variable Costing,

1. Contibution Margin = Sale Price per unit - Total Variable Costs per unit

= $10 - ($2+$2+$1+$1) = $4 per unit

2. Net Income = Total Contribution - Fixed Costs

= ($4x5000) - ($7500+$1000) = $11500

3. Cost of Ending Inventory = (Production units - Sale units) x Variable Manufacturing Costs per unit

= (7500-5000) x ($2+$2+$1) = $12500

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