Question

Corporation sold 210000 watches and produced 217000 watches that it sold for $19 each. The company determined that fixed manufacturing cost per unit was $8 per watch. The company reported a $1,302,000 gross margin on its financial statements. Determine the total contribution margin.

Answer 1

The total contribution margin is:

= $2,982,000.

Step-by-step explanation:

a) Data and Calculations:

Production units = 217,000 watches

Sales units = 210,000 watches

Sales price per watch = $19

Sales revenue = $3,990,000 (210,000 * $19)

Cost of goods sold 2,688,000 ($3,990,000 - $1,302,000) ($12.80 each)

Gross profit = $1,302,000

Cost of goods sold per unit = $12.80 ($2,688,000/210,000)

Fixed cost per unit = $8

Variable cost per unit = $4.80 ($12.80 - $8.00)

Contribution margin per unit = $14.20

Total contribution margin = $2,982,000 ($14.20 * 210,000)