Question

Only one single product is produced by Horned Frog Corporation. Horned Frog's normal monthly activity level is 40,000 units per month. The table below shows the cost of producing and selling a single unit of this product at Horned Frog's normal monthly activity level.

Direct materials	$	51.60
Direct labor	$	15.00
Variable manufacturing overhead	$	1.40
Fixed manufacturing overhead	$	22.00
Variable selling & administrative expense	$	1.90
Fixed selling & administrative expense	$	17.50

Normally Horned Frog's selling price is $115.20 per unit for this product.

A customer in a far away foreign land has sent in an order for 1,400 units at a special discounted price. The customer wants the units to be delivered this month. For Horned Frog, the foreign order would not change the total amount of its fixed costs.

Horned Frog has determined that the variable selling and administrative expense would be $1.30 less per unit on this order than on normal sales.

Horned Frog's direct labor is a variable cost in this company.


What is the contribution margin per unit on normal sales?

$45.30

$15.30

$16.70

$14.00

Answer 1

Sales	$115.20
Less: Direct material	51.60
Direct labor	15.00
Variable manufacturing overhead	1.40
Variable selling & administrative expense	1.90
Contribution margin per unit	$45.30