Given the following information [daily basis] on a manufacturing company, calcul

Question

Given the following information [daily basis] on a manufacturing company, calculate (a) contribution margin on a per unit basis, (b) contribution margin on a total dollar basis, and (c) fixed costs.

Average selling price for manufacturer’s product = $5.00

Daily Break-even level [units] = 10,000

Variable cost per unit = $0.50

Assume that the variable cost per unit in the previous problem = standard cost per unit and that daily break-even level of units = amount actually purchased. If the actual cost per unit at the time of purchase increases 10%, what is the variance for total variable cost? Is financial impact positive or negative?

Explanation / Answer

(a) contribution margin on a per unit basis,

= Selling price - Variable cost = $ 5 - $ 0.50 = 4.50

(b) contribution margin on a total dollar basis,

= contribution / selling price = 4.5/5 = $ 0.90 per dollar of sales

(c) fixed costs.

= BEP in units * contribution per unit = 10000 * 4.5 = 45000

what is the variance for total variable cost?

10000 * 0.50 * 10% = 500 Unfavorable

Is financial impact positive or negative?

Unfavorable variance will have Negative financial impact

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