FUNDAMENTAL ACCOUNTING PRINCIPLES
FUNDAMENTAL ACCOUNTING PRINCIPLES
24th Edition
ISBN: 9781260811704
Author: Wild
Publisher: MCG
Question
Book Icon
Chapter 21, Problem 27E
To determine

Introduction:

Contribution margin is the excess of sales over variable cost. In other words, sales minus variable cost equals contribution margin.

The missing amounts denoted by letters a to n

Expert Solution & Answer
Check Mark

Answer to Problem 27E

Solution:

The calculation of missing items is shown in the explanation section.

Explanation of Solution

    ParticularsCompany ACompany B
    Number of Units sold3200 (Note a)1975
    TotalPer unitTotalPer unit
    Sales$208000$65$82950 (Note h)$42 (Note i)
    Variable Costs150400$47 (Note b)$39500$20 (Note j)
    Contribution margin$57600 (Note c)$18 (Note (d)43450$22 (Note k)
    Fixed costs$11200 (Note e)$3.50 (Note f)19750$10 (Note l)
    Net income$46400$14.50 (Note g)$23700(Note m)$12 (Note n)

Working Notes:

  1. Calculation of number of units sold is as follows:
  2.   Number of units sold=Sales/Selling price per unit

    Number of units sold in Company A: =$208000/$65=3200 units

  3. Variable cost per unit in case of Company A:
  4.   Variable cost per unit=Total variable costs/Units sold

    Variable cost per unit in case of Company A: &150400/3200=$47 per unit

  5. Contribution margin of Company A:
  6.   Contribution margin=SalesVariable costs

    Contribution Margin =$208000-$150400=$57600

  7. Contribution margin per unit of Company A:
  8.   Contribution margin per unit=Contribution margin/Units sold

    =$57600/3200=$18 per unit

  9. Fixed cost of Company A:
  10.   Fixed Costs=ContributionNet Income

    =$57600-$46400=$11200

  11. Calculation fixed cost per unit of Company A:
  12.   Fixed cost per unit=Total fixed cost/Units sold

    =$11200/3200=$3.50 per unit

  13. Calculation of net income of Company A:
  14.   Net income per unit=Net Income/Units sold

    =$46400/3200=$14.50 per unit

  15. Calculation of Sales of Company B:
  16.   Sales=Contribution + Variable cost

    =$43450+$39500=$82950

  17. Calculation of sales per unit of Company B:
  18.   Selling price per unit=Total sales/Units sold

    =$82950/1975=$42 per unit

  19. Variable cost per unit of Company B:
  20.   Variable cost per unit=Total variable costs/Units sold

    =$39500/1975=@20 per unit

  21. Contribution per unit of Company B:
  22.   Contribution margin per unit=Contribution margin/Units sold

    = $43450/1975=$22 per unit

  23. Calculation of Fixed cost per unit of Company B:
  24.   Fixed cost per unit=Total fixed cost/Units sold

    = $19750/1975=$10 per unit

  25. Calculation of net income of Company B:
  26.   Net income=ContributionFixed cost

    =$43450-$19750=$23700

  27. Calculation of Net income per unit of Company B:
  28.   Net income per unit=Net Income/Units sold

    =$23700/1975=$12 per unit

Want to see more full solutions like this?

Subscribe now to access step-by-step solutions to millions of textbook problems written by subject matter experts!

Chapter 21 Solutions

FUNDAMENTAL ACCOUNTING PRINCIPLES

Ch. 21 - Prob. 11DQCh. 21 - List three methods to measure cost behavior.Ch. 21 - Prob. 13DQCh. 21 - Prob. 14DQCh. 21 - Prob. 15DQCh. 21 - Prob. 16DQCh. 21 - Prob. 17DQCh. 21 - Prob. 18DQCh. 21 - Prob. 19DQCh. 21 - Prob. 20DQCh. 21 - Prob. 21DQCh. 21 - Prob. 22DQCh. 21 - Cost behavior identification C1 Listed here are...Ch. 21 - QS 21-2 Cost behavior identification c1 ...Ch. 21 - QS 21-3 Cost behavior estimation—high-low method...Ch. 21 - Prob. 4QSCh. 21 - Prob. 5QSCh. 21 - Prob. 6QSCh. 21 - Prob. 7QSCh. 21 - Prob. 8QSCh. 21 - Prob. 9QSCh. 21 - Prob. 10QSCh. 21 - Prob. 11QSCh. 21 - Prob. 12QSCh. 21 - Prob. 13QSCh. 21 - Prob. 14QSCh. 21 - Prob. 15QSCh. 21 - Prob. 16QSCh. 21 - Prob. 17QSCh. 21 - Prob. 18QSCh. 21 - Prob. 19QSCh. 21 - Prob. 20QSCh. 21 - Prob. 21QSCh. 21 - Prob. 1ECh. 21 - Prob. 2ECh. 21 - Prob. 3ECh. 21 - Prob. 4ECh. 21 - Prob. 5ECh. 21 - Prob. 6ECh. 21 - Prob. 7ECh. 21 - Prob. 8ECh. 21 - Prob. 9ECh. 21 - Prob. 10ECh. 21 - Prob. 11ECh. 21 - Prob. 12ECh. 21 - Prob. 13ECh. 21 - Prob. 14ECh. 21 - Prob. 15ECh. 21 - Prob. 16ECh. 21 - Prob. 17ECh. 21 - Prob. 18ECh. 21 - Prob. 19ECh. 21 - Prob. 20ECh. 21 - Prob. 21ECh. 21 - Prob. 22ECh. 21 - Prob. 23ECh. 21 - Prob. 24ECh. 21 - Prob. 25ECh. 21 - Prob. 26ECh. 21 - Prob. 27ECh. 21 - Prob. 1APSACh. 21 - Prob. 2APSACh. 21 - Prob. 3APSACh. 21 - Prob. 4APSACh. 21 - Prob. 5APSACh. 21 - Prob. 6APSACh. 21 - Prob. 7APSACh. 21 - Prob. 1BPSBCh. 21 - Prob. 2BPSBCh. 21 - Prob. 3BPSBCh. 21 - Prob. 4BPSBCh. 21 - Prob. 5BPSBCh. 21 - Prob. 6BPSBCh. 21 - Prob. 7BPSBCh. 21 - Prob. 21SPCh. 21 - Prob. 2AACh. 21 - Prob. 3AACh. 21 - Labor costs of an auto repair mechanic are seldom...Ch. 21 - Prob. 2BTNCh. 21 - Prob. 4BTNCh. 21 - Prob. 6BTN
Knowledge Booster
Background pattern image
Recommended textbooks for you
Text book image
FINANCIAL ACCOUNTING
Accounting
ISBN:9781259964947
Author:Libby
Publisher:MCG
Text book image
Accounting
Accounting
ISBN:9781337272094
Author:WARREN, Carl S., Reeve, James M., Duchac, Jonathan E.
Publisher:Cengage Learning,
Text book image
Accounting Information Systems
Accounting
ISBN:9781337619202
Author:Hall, James A.
Publisher:Cengage Learning,
Text book image
Horngren's Cost Accounting: A Managerial Emphasis...
Accounting
ISBN:9780134475585
Author:Srikant M. Datar, Madhav V. Rajan
Publisher:PEARSON
Text book image
Intermediate Accounting
Accounting
ISBN:9781259722660
Author:J. David Spiceland, Mark W. Nelson, Wayne M Thomas
Publisher:McGraw-Hill Education
Text book image
Financial and Managerial Accounting
Accounting
ISBN:9781259726705
Author:John J Wild, Ken W. Shaw, Barbara Chiappetta Fundamental Accounting Principles
Publisher:McGraw-Hill Education