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Managerial Accounting: The Corners...
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Managerial Accounting: The Corners...
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:
Variable selling expense is a commission of $3 per pair; fixed selling and administrative expense totals $48,000.
Required:
- 1. Calculate the total variable cost per unit.
- 2. Calculate the total fixed expense for the year.
- 3. Prepare a contribution margin income statement for Chillmax Company for the coming year.
1.
Compute the total variable cost per unit.
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:
2.
Compute the total fixed expense.
3.
Make a contribution margin income statement for Company C for the coming year.
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