ACCT 20353 Chapter 2: Notes
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Variable Costs, Contribution Margin, Contribution Margin Ratio
Super-Tees Company plans to sell 12,000 T-shirts at $16 each in the coming year. Product costs include:
Direct materials per T-shirt | $5.75 |
Direct labor per T-shirt | $1.25 |
Variable overhead per T-shirt | $0.60 |
Total fixed factory overhead | $43,000 |
Variable selling expense is the redemption of a coupon, which averages $0.80 per T-shirt; fixed selling and administrative expenses total $19,000.
Required:
1. Calculate the following values:
Round dollar amounts to the nearest cent and round ratio values to three decimal places.
a. Variable product cost per unit | $ |
b. Total variable cost per unit | $ |
c. Contribution margin per unit | $ |
d. Contribution margin ratio | |
e. Total fixed expense for the year | $ |
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2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.
Super-Tees Company | ||
Contribution-Margin-Based Operating Income Statement | ||
For the Coming Year | ||
Total | Per Unit | |
< >SalesTotal contribution marginTotal fixed expenseTotal variable expense | $ | $ |
< >SalesTotal contribution marginTotal fixed expenseTotal variable expense | ||
< >SalesTotal contribution marginTotal fixed expenseTotal variable expense | $ | $ |
< >SalesTotal contribution marginTotal fixed expenseTotal variable expense | ||
< >Operating incomeOperating lossSalesTotal contribution margin | $ |
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3. What if the per unit selling expense increased from $0.80 to $1.75? Calculate new values for the following:
Round dollar amounts to the nearest cent and round ratio values to four decimal places:
a. Variable product cost per unit | $ |
b. Total variable cost per unit | $ |
c. Contribution margin per unit | $ |
d. Contribution margin ratio | |
e. Total fixed expense for the year | $ |