The following information applies to the questions displayed

[The following information applies to the questions displayed below Diego Company manufactures one product that is sold for $76 per unit in two geographic regions-the East and West regions. The following information pertains to the company\'s first year of operations in which it produced 58,000 units and sold 54,000 units Variable costs per unit Manufacturing Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative 23 15 3 3 Fixed costs per year Fixed manufacturing overhead Fixed selling and administrative expenses $ 1160,000 $ 640.000 The company sold 40.000 units in the East region and 14.000 units in the West region. It determined that $320,000 of its fixed selling and administrative expenses is traceable to the West region, $270,000 is traceable to the East region, and the remaining $50,000 is a common fixed cost. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product

Solution

Solution 1:

Unit product cost under variable costing = Direct material + Direct labor + Variable manufacturing overhead

= $23 + $15 + $3 = $41 per unit

Solution 2:

Fixed manufacturing overhead per unit = Fixed manufacturing overhead / Nos of unit produced = $1,160,000 / 58000 = $20 per unit

Unit product cost under absorption costing = Direct material + Direct labor + Variable manufacturing overhead + Fixed manufacturing overhead = $23 + $15 + $3 + $20 = $61 per unit

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Computation of contribution margin - Variable costing
Particulars	Amount
Sales (54000 * $76)	$4,104,000.00
Variable cost:
Direct material (54000 * $23)	$1,242,000.00
Direct labor (54000*$15)	$810,000.00
Variable manufacturing overhead (54000*$3)	$162,000.00
Variable selling and administrative expenses (54000*$3)	$162,000.00
Total variable cost	$2,376,000.00
Contribution margin	$1,728,000.00