Elfalan Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 80,000 units per month is as follows: Per Unit Direct materials $ 22.50 Direct labor $ 7.50 Variable manufacturing overhead $ 1.70 Fixed manufacturing overhead $ 19.00 Variable selling & administrative expense $ 2.70 Fixed selling & administrative expense $ 8.60 The normal selling price of the product is $67.80 per unit. An order has been received from an overseas customer for 3,000 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $1.90 less per unit on this order than on normal sales. Direct labor is a variable cost in this company. What is the contribution margin per unit on normal sales? (Round your intermediate calculations to 2 decimal places.) a. $7.20 per unit b. $33.40 per unit c. $5.80 per unit d. $7.70 per unit
Added by Kyle H.
Your feedback will help us improve your experience
Lottie Adams and 65 other Microeconomics educators are ready to help you.
Ask a new question
Labs
Want to see this concept in action?
Explore this concept interactively to see how it behaves as you change inputs.
Key Concepts
Recommended Videos
Kubin Company’s relevant range of production is 17,000 to 26,500 units. When it produces and sells 21,750 units, its average costs per unit are as follows: Amount per Unit Direct materials $7.80 Direct labor $4.80 Variable manufacturing overhead $2.30 Fixed manufacturing overhead $5.80 Fixed selling expense $4.30 Fixed administrative expense $3.30 Sales commissions $1.80 Variable administrative expense $1.30 Required: 1. What is the incremental manufacturing cost incurred if the company increases production from 21,750 to 21,751 units? 2. What is the incremental cost incurred if the company increases production and sales from 21,750 to 21,751 units? 3. Assume that Kubin Company produced 21,750 units and expects to sell 21,470 of them. If a new customer unexpectedly emerges and expresses interest in buying the 280 extra units that have been produced by the company and that would otherwise remain unsold, what is the incremental manufacturing cost per unit incurred to sell these units to the customer? 4. Assume that Kubin Company produced 21,750 units and expects to sell 21,470 of them. If a new customer unexpectedly emerges and expresses interest in buying the 280 extra units that have been produced by the company and that would otherwise remain unsold, what incremental selling and administrative cost per unit is incurred to sell these units to the customer?
Akash M.
The Central Valley Company is a manufacturing firm that produces and sells a single product. The company's revenues and expenses for the last four months are given below. Central Valley Company Comparative Income Statement March April May June Sales in units 6,200 5,700 7,050 8,400 Sales revenue $762,600 $701,100 $867,150 $1,033,200 Less: Cost of goods sold 402,800 378,594 450,918 526,932 Gross margin $359,800 $322,506 $416,232 $506,268 Less: Operating Expenses Shipping expense $63,900 $53,600 $67,400 $65,000 Advertising expense 88,000 88,000 88,000 88,000 Salaries and commissions 164,400 137,000 167,500 171,500 Insurance expense 15,000 15,000 15,000 15,000 Amortization expense 48,000 48,000 48,000 48,000 Total operating expenses $379,300 $341,600 $385,900 $387,500 Net income $(19,500) $(19,094) $30,332 $118,768 Required: 1. Management is concerned about the losses experienced during the spring and would like to know more about the cost behavior. Develop a cost equation for each of the costs. (Do not round intermediate calculations. Round "Per Unit" answers to 2 decimal places.) 2. Assume that fixed costs are incurred uniformly throughout the year. Compute the annual break-even sales, and the profit if 79,000 units are sold during the year. (Round "Break-even sales" answer to nearest whole number.) 3. Calculate the change in profit if the selling price were reduced by $10.5 each and annual sales were to increase by 7,400 units. 4. Determine the change in profit if the company were to increase advertising by $112,000 and if this were to increase sales by 7,400 units.
Madhur L.
The HighStep Shoe Company operates a chain of shoe stores that sell 10 different styles of inexpensive men's shoes with identical unit costs and selling prices. A unit is defined as a pair of shoes. Each store has a store manager who is paid a fixed salary. Individual salespeople receive a fixed salary and a sales commission. HighStep is considering opening another store that is expected to have the revenue and cost relationships shown here. Consider each question independently. 1. What is the annual breakeven point in (a) units sold and (b) revenues? 2. If 8,000 units are sold, what will be the store's operating income (loss)? 3. If sales commissions are discontinued and fixed salaries are raised by a total of $\$ 15,500,$ what would be the annual breakeven point in (a) units sold and (b) revenues? 4. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $\$ 2.00$ per unit sold, what would be the annual breakeven point in (a) units sold and (b) revenues? 5. Refer to the original data. If, in addition to his fixed salary, the store manager is paid a commission of $\$ 2.00$ per unit in excess of the breakeven point, what would be the store's operating income if 12,000 units were sold?
Recommended Textbooks
Principles of Economics
Principles of Microeconomics for AP® Courses
Economics
Transcript
Watch the video solution with this free unlock.
EMAIL
PASSWORD