Question 3 (of 12) Save & Exit Submit Time remaining: 0:52:17 [The following inf
ID: 343258 • Letter: Q
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Question 3 (of 12) Save & Exit Submit Time remaining: 0:52:17 [The following information applies to the questions displayed below] Diego Company manufactures one product that is sold for $75 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 57,000 units and sold 52,000 units Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative $ 25 18 3 5 Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expenses 627000 645,000 The company sold 36,000 units in the East region and 16,000 units in the West region. It determined that $310,000 of its fixed selling and administrative expenses is traceable to the West region, $260,000 is traceable to the East region, and the remaining $75,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 3. Requirec information 3. What is the company's total contribution margin under variable costing? Total Contribution marginExplanation / Answer
To be calculated:
Company’s total contribution margin under variable costing
Given values:
Selling price of the product = $75 per unit
Number of units produced = 57,000 units
Number of units sold = 52,000 units
Variable costs per unit are given as;
Direct materials = $25
Direct labor = $18
Variable manufacturing overhead = $3
Variable selling and administrative = $5
Solution:
For selling 52,000 units;
Total Revenue = Total units sold x Selling price per unit
Total Revenue = 52000 x $75
Total Revenue = $3,900,000
Total variable cost = Total variable costs per unit x Number of units sold
Total variable cost = ($25 + $18 + $3 + $5) x 52000
Total variable cost = $51 x 52000
Total variable cost = $2,652,000
Company’s total contribution margin under variable costing is calculated as;
Total contribution margin = Total Revenue - Total variable cost
Total contribution margin = $3,900,000 - $2,652,000
Total contribution margin = $1,248,000
Company’s total contribution margin under variable costing is $1,248,000.
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