Question

A company's flexible budget for 8,000 units of production showed sales, $34,400; variable costs, $17,600; and fixed costs, $17,000. What is the contribution margin expected if the company produces and sells 17,000 units?

Answer 1

To find the contribution margin, subtract the variable costs per unit from the selling price per unit. For 17,000 units, the contribution margin is ($4.30 - $2.20) imes 17,000.

Step-by-step explanation:

To find the contribution margin per unit, we need to subtract the variable costs per unit from the selling price per unit. In the flexible budget, the contribution margin per unit can be calculated as follows:

Contribution margin per unit = Selling price per unit - Variable costs per unit

For 8,000 units, the contribution margin is:

Contribution margin = (Selling price per unit - Variable costs per unit) imes Units

Now we can calculate the contribution margin for 17,000 units:

Contribution margin = (Selling price per unit - Variable costs per unit) imes Units

where Selling price per unit is $34,400/8,000 = $4.30 and Variable costs per unit is $17,600/8,000 = $2.20.

So, the contribution margin for 17,000 units is:

Contribution margin = ($4.30 - $2.20) imes 17,000