Suppose that Larimer Company sells a product for $24. Unit costs are as follows:

Direct materials $4.98

Direct labor 2.10

Variable factory overhead 1.00

Variable selling and administrative expense 2.00

Total fixed factory overhead is $26,500 per year, and total fixed selling and administrative expense is $15,260.

Calculate the variable cost per unit and the contribution margin per unit.

Unitary variable cost = $8.08

Contribution margin = $15.92

Explanation:

Giving the following information:

Direct materials $4.98

Direct labor 2.10

Variable factory overhead 1.00

The variable cost per unit is the sum of direct material, direct labor, and variable overhead.

Unitary variable cost = 4.98 + 2.1 + 1 = $8.08

The contribution margin per unit is the difference between the selling price and the unitary variable cost:

Contribution margin = 24 - 8.08 = $15.92