# Variable Cost and Contribution Margin

2033 words 9 pages
1. Cost of goods manufactured will usually include:
A. only direct labor and direct materials costs.
B. some costs incurred during the prior period as well as costs incurred during the current period.
C. only costs incurred during the current period.
D. some period costs as well as some product costs.

2. During the month of August, direct labor cost totaled \$13,000 and direct labor cost was 20% of prime cost. If total manufacturing costs during August were \$88,000, the manufacturing overhead was:
A. \$52,000
B. \$75,000
C. \$65,000
D. \$23,000

0.20 x Prime cost = Direct labor
0.20 x Prime cost = \$13,000
Prime cost = \$65,000
Prime cost = Direct materials + Direct labor
\$65,000 = Direct materials + \$13,000
Direct materials

\$5.00
B. \$10.00
C. \$4.00
D. \$8.00
Equivalent units for materials = 5,000 x 80% = 4,000
Equivalent units for conversion = 5,000 x 50% = 2,500
Ending inventory dollar value = \$60,000
Ending inventory dollar value = (Equivalent units for materials x Cost per equivalent unit for materials) + (Equivalent units for conversion x Cost per equivalent unit for conversion)
\$60,000 = (4,000 x Cost per equivalent unit for materials) + (2,500 x \$8.00)
\$60,000 = 4,000x X + \$20,000
X = \$10.00

16. Iacopi Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for \$172.50 per unit.

The best estimate of the total contribution margin when 4,300 units are sold is:
A. \$121,260
B. \$65,790
C. \$411,080
D. \$343,140
Variable component of cost of goods sold:
Variable cost = Change in costs Change in units
Variable cost = (\$384,500 - \$307,600) (5,000 - 4,000)
Variable cost = \$76.90 per unit
Variable component of selling and administrative expenses:
Variable cost = Change in costs Change in units
Variable cost = (\$337,000 - \$321,200) (5,000 - 4,000)
Variable cost = \$15.80 per unit

17. Anderton Corporation has provided the following production and average cost data for two levels

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