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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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Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense

For each of the following independent situations, calculate the amount(s) required.

Required:

  1. 1. At the break-even point, Jefferson Company sells 115,000 units and has fixed cost of $349,600. The variable cost per unit is $4.56. What price does Jefferson charge per unit?
  2. 2. Sooner Industries charges a price of $120 and has fixed cost of $458,000. Next year, Sooner expects to sell 15,600 units and make operating income of $166,000. What is the variable cost per unit? What is the contribution margin ratio? (Note: Round answer to four decimal places.)
  3. 3. Last year, Jasper Company earned operating income of $22,500 with a contribution margin ratio of 0.25. Actual revenue was $235,000. Calculate the total fixed cost.
  4. 4. Laramie Company has a variable cost ratio of 0.56. The fixed cost is $103,840 and 23,600 units are sold at break-even. What is the price? What is the variable cost per unit? The contribution margin per unit?

1.

To determine

Calculate the price that is charged per unit.

Explanation

Variable Cost Per Unit:

The unit cost that changes in accordance to the change in the sold units is called variable cost per unit. The variable cost per unit includes unit cost of direct material, direct labor, variable overhead and variable selling expense.

Use the following formula to compute contribution margin per unit:

Contribution Margin Per Unit=Total contribution marginBreak-even units

Substitute $349,600 for total contribution margin and $115,000 for break-even units.

Contribution Margin Per Unit=$349,600$115,000=$3

2.

To determine

Calculate the variable cost per unit and contribution margin ratio of Company S.

3.

To determine

Calculate the total fixed cost of Company J for the previous year.

4.

To determine

Calculate the price, variable cost per unit and contribution margin per unit of Company L.

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