Zeitgeist Company manufactures silicon sleeves for MP3 players. In August of last year, Zeitgeist began producing the colorful sleeves. During the month of August, 16,000 were produced, and 14,750 were sold at $6.95 each. The following costs were incurred: Direct materials $26,880 Direct labor 6,720 Variable overhead 5,920 Fixed overhead 28,160What is the contribution margin per unit?

Question

Business

Kinley Hogan

14 November, 13:41

Zeitgeist Company manufactures silicon sleeves for MP3 players. In August of last year, Zeitgeist began producing the colorful sleeves. During the month of August, 16,000 were produced, and 14,750 were sold at $6.95 each. The following costs were incurred: Direct materials $26,880 Direct labor 6,720 Variable overhead 5,920 Fixed overhead 28,160What is the contribution margin per unit?

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Marshall Holden · Answer 1

Contribution margin per unit = $4.48

Explanation:

Giving the following information:

During August, 16,000 were produced, and 14,750 were sold at $6.95 each. The following costs were incurred: Direct materials $26,880 Direct labor 6,720 Variable overhead 5,920 Fixed overhead 28,160

Unitary costs:

Direct material = 26,880/16,000 = 1.68

Direct labor = 6,720/16000 = 0.42

Variable overhead = 5,920/16,000 = 0.37

Unitary variable cost = $2.47

Contribution margin per unit = 6.95 - 2.47 = 4.48