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11 May, 14:02

A steel company manufactures heavy-duty brackets for the shelving industry. The company has budgeted for the production and sale of 1,000,000 brackets and has no beginning or ending inventory. Relevant operational, revenue, and cost data is as follows: Unit selling price of a bracket $22.50 Direct material required per unit 4 pounds Direct labor required per unit 0.15 hours Cost of material per pound $1.75 Direct labor cost per hour $9.00 Total variable selling costs $2,250,000 Total fixed costs $1,500,000 Based on the data provided, what is the unit contribution margin per bracket

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  1. 11 May, 14:43
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    Contribution margin per unit = $11.90

    Explanation:

    Given:

    Total unit sale = 1,000,000

    Unit selling price of a bracket = $22.50

    Direct material required = 4 pounds per unit

    Direct labor required = 0.15 hours per unit

    Cost of material per pound = $1.75

    Direct labor cost per hour = $9.00

    Total variable selling cost = $2,250,000

    Find:

    Contribution margin per unit = ?

    Computation:

    Direct material per unit = 4 pounds per unit * $1.75

    Direct material per unit = $7

    Direct labor per unit = 0.15 hours per unit * $9.00

    Direct labor per unit = $1.35

    Variable selling cost per unit = Total variable selling cost / Total unit sale

    Variable selling cost per unit = $2,250,000 / 1,000,000

    Variable selling cost per unit = $2.25

    Contribution margin per unit = Sales per unit - Variable cost per unit

    Contribution margin per unit = Sales per unit - [Direct material per unit + Direct labor per unit + Variable selling cost per unit]

    Contribution margin per unit = $22.50 - [$7 - $1.35 - $2.25]

    Contribution margin per unit = $22.50 - [$10.6]

    Contribution margin per unit = $11.90
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