Newman Company expects to produce and sell 2000 units next m

Newman Company expects to produce and sell 2,000 units next month. Data on costs follows: Per Unit: Sales Price $40 Manufacturing Variable Cost $10 Selling Variable Cost $6 8. Total Costs: Fixed Manufacturing $16,000 Fixed Selling $8,000 A. What is the variable cost per unit? B. what is the contribution margin per unit? C. what is the variable cost ratio? D. What is the contribution margin ratio?

Solution

A. Manufacturing Variable Cost $10

+ Selling Variable Cost    $6

Variable Cost Per Unit $16   

B. Sales Price Per unit $40

Less: Variable Cost Per unit(From A) ( $16)   

Contribution Margin Per unit $24   

C. Variable Cost ratio = Total Variable Cost

sales

= $16 / $40 = 0.40 or 40%

D.Contribution Margin Ratio = Contribution Margin   

Sales

= $24 / $40 = 0.60 or 60%