Krepps Corporation produces a single product. Last year, Krepps manufactured 20,

Question

Krepps Corporation produces a single product. Last year, Krepps manufactured 20,000 units and sold 15,000 units. Production costs for the year were as follows:

Sales totaled $825,000 for the year, variable selling and administrative expenses totaled $108,000, and fixed selling and administrative expenses totaled $165,000. There was no beginning inventory. Assume that direct labor is a variable cost.

The contribution margin per unit was:

$23.80 per unit

$31.00 per unit

$25.60 per unit

$19.00 per unit

Direct materials $ 170,000 Direct labor $ 110,000 Variable manufacturing overhead $ 200,000 Fixed manufacturing overhead $ 240,000

Explanation / Answer

Calculate contribution margin per unit :

Direct material, direct labour , variable manufacturing o/h per unit : (170000+110000+200000)/20000 = 24 per unit

Variable selling and administrative exp per unit = (108000/15000) = 7.20

Sales per unit = (825000/15000) = 55 per unit

Contribution margin per unit = (55-24-7.20) = 23.80 per unit

so answer is a) $23.80 per unit

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