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Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

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BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
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Variable Cost, Fixed Cost, Contribution Margin Income Statement

Chillmax Company plans to sell 3,500 pairs of casual shoes at $60 each in the coming year. Product costs include:

Chapter 7, Problem 24BEB, Variable Cost, Fixed Cost, Contribution Margin Income Statement Chillmax Company plans to sell 3,500

Variable selling expense is a commission of $3 per pair; fixed selling and administrative expense totals $48,000.

Required:

  1. 1. Calculate the total variable cost per unit.
  2. 2. Calculate the total fixed expense for the year.
  3. 3. Prepare a contribution margin income statement for Chillmax Company for the coming year.

1.

To determine

Compute the total variable cost per unit.

Explanation

Variable Cost per Unit:

Variable cost per unit can be evaluated by dividing the total variable cost by the number of units or by adding all the variable costs per unit. Variable costs can be defined as the costs which increase with the increase in output and decrease with the decrease in output.

Use the following formula to calculate the variable cost per unit:

Variable cost per unit=(Direct materials per pair+Direct labor per pair+Variable factory overhead per pair+Vari

2.

To determine

Compute the total fixed expense.

3.

To determine

Make a contribution margin income statement for Company C for the coming year.

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