Question

Columbia Products produced and sold 1,400 units of the company's only product in March. You have collected the following Information from the accounting records: $ 130 16,800 10 Sales price (per unit) Manufacturing costs: Fixed overhead (for the month) Direct labor (per unit) Direct materials (per unit) Variable overhead (per unit) Marketing and administrative costs: Fixed costs (for the month) Variable costs (per unit) 21,000 Required: a. Compute the following: 1. 2. 3. 4. 5. 6. 7. 8. 9. Variable manufacturing cost per unit. Full cost per unit. Variable cost per unit. Full absorption cost per unit. Prime cost per unit. Conversion cost per unit. Profit margin per unit. Contribution margin per unit. Gross margin per unit

Answer 1

Solution:

1. Variable manufacturing cost per unit = Direct materials + Direct labor + Variable manufacturing overhead

= $29 + $10 + $26 = $65 per unit

2. Full cost per unit = Variable manufacturing cost per unit + Fixed overhead per unit + Variable marketing and administrative cost per unit + fixed marketing and administrative cost per unit

= $65 + ($16,800 / 1400) + $4 + ($21,000 / 1400)

= $96 per unit

3. Variable cost per unit = Variable manufacturing cost per unit + Variable marketing and administrative cost per unit = $65 + $4 = $69 per unit

4. Full absorption cost per unit = Variable manufacturing cost per unit + Fixed overhead per unit

$65 + ($16,800 / 1400) = $77 per unit

5. Prime cost per unit = Direct materials + Direct labor = $29 + $10 = $39 per unit

6. Conversion cost per unit = Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead

= $10 + $26 + $12 = $48 per unit

7. Profit margin per unit = Selling price - full cost per unit = $130 - $96 = $34 per unit

8. contribution margin per unit = Selling price - variable cost = $130 - $69 = $61 per unit

9. Gross margin per unit = Selling price - absorption cost per unit = $130 - $77 = $53 per unit