Question

Cool Fan Company sells 10,000 units to wholesalers each year at $60 per unit. The materials cost $10 per fan and unit labor cost is $15. The total promotion and marketing costs are $100,000. The facility expenses are $80,000 per year and other overheads cost $20,000. What is the unit contribution of each fan?a. $ 150,000

b. $ 200,000
c. $ 250,000
d. $ 300,000
e. $ 350,000

Answer 1

e. $ 350,000

Step-by-step explanation:

Given: Total number of units= 10000.

Selling price= $60 per unit.

The material cost= $10 per fan

Labor cost= $15 per unit.

Promotion and marketing cost= $100000.

Facility expense= $80000.

Other overhead cost= $20,000.

Now, finding the variable cost of fan.

Variable cost=
`Total\ material\ cost + Labor\ cost`

Variable cost=
`(\$ 10* 10000+ \$ 15 *  10000)`

⇒ Variable cost=
`\$ 100000+\$ 150000= \$ 250000`

∴ Variable cost= $250000.

Selling price=
`(\$ 60* 10000)= \$ 600000`

∴ Selling price of fan is $600000.

Unit contribution=
`(selling\ price - variable\ cost)`

Next find the unit contribution of each fan.

⇒ Unit contribution=
`(\$ 600000 - \$ 250000)`

∴ Unit contribution of each fan is $350000.