eBook Cornerstone Exercise 16.1 (Algorithmic) Variable Costs, Contribution Margi
ID: 2596808 • Letter: E
Question
eBook Cornerstone Exercise 16.1 (Algorithmic) Variable Costs, Contribution Margin, Contribution Margin Ratio Super-Tees Company plans to sell 10,000 T-shirts at $15 each in the coming year. Product costs include: Direct materials per T-shirt Direct labor per T-shirt Variable overhead per T-shirt Total fixed factory overhead $5.25 $1.05 $0.45 $40,000 ing expense is the redemption of a coupon, which averages so.75 per T-shirt, fixed selling and administrative expenses total $16,000 Required: 1. Calculate the following values: Round dollar amounts to the nearest cent and round ratio values to three decimal places (express the ratio as a d a. Variable product cost per unit6.75 b. Total variable cost per unit c. Contribution margin per unit d. Contribution margin ratio e. Total fixed expense for the yearExplanation / Answer
a. Variable product cost per unit
Direct material per T shirt
5.25
Direct labour per T shirt
1.05
Variable overheads per T shirt
0.45
6.75
b. Total variable cost per unit
Direct material per T shirt
5.25
Direct labour per T shirt
1.05
Variable overheads per T shirt
0.45
Variable selling expenses per T shirt
0.75
7.5
c. Contribution margin per unit
Selling price per T shirt
15
Less: Variable cost per T Shirt
7.5
Contribution margin per unit
7.5
d. Contribution margin ratio
Selling price per T shirt
15
Variable cost per T Shirt
7.5
Contribution margin ratio (7.5/15)*100
50%
e. Total fixed expenses for the year
Total fixed factory overheads
40000
fixed selling and administrative expenses
16000
Total fixed expenses for the year
56000
a. Variable product cost per unit
Direct material per T shirt
5.25
Direct labour per T shirt
1.05
Variable overheads per T shirt
0.45
6.75
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