Question

A steel company manufactures heavy-duty brackets for the shelving industry. The company has budgeted for the production and sale of 1,000,000 brackets and has no beginning or ending inventory. Relevant operational, revenue, and cost data is as follows: Unit selling price of a bracket $22.50 Direct material required per unit 4 pounds Direct labor required per unit 0.15 hours Cost of material per pound $1.75 Direct labor cost per hour $9.00 Total variable selling costs $2,250,000 Total fixed costs $1,500,000 Based on the data provided, what is the unit contribution margin per bracket

Answer 1

The unit contribution margin per bracket is $14.15.

Step-by-step explanation:

The unit contribution margin per bracket can be calculated by subtracting the total variable costs per unit from the unit selling price. In this case, the unit selling price of a bracket is $22.50, and the total variable costs per unit are the sum of the direct material cost and the direct labor cost per unit. The direct material required per unit is 4 pounds and the cost of material per pound is $1.75, so the direct material cost per unit is 4 x $1.75 = $7. The direct labor required per unit is 0.15 hours and the direct labor cost per hour is $9.00, so the direct labor cost per unit is 0.15 x $9.00 = $1.35. Therefore, the total variable costs per unit are $7 + $1.35 = $8.35. Hence, the unit contribution margin per bracket is $22.50 - $8.35 = $14.15.

Answer 2

Contribution margin per unit = $11.90

Step-by-step explanation:

Given:

Total unit sale = 1,000,000

Unit selling price of a bracket = $22.50

Direct material required = 4 pounds per unit

Direct labor required = 0.15 hours per unit

Cost of material per pound = $1.75

Direct labor cost per hour = $9.00

Total variable selling cost = $2,250,000

Find:

Contribution margin per unit = ?

Computation:

Direct material per unit = 4 pounds per unit × $1.75

Direct material per unit = $7

Direct labor per unit = 0.15 hours per unit × $9.00

Direct labor per unit = $1.35

Variable selling cost per unit = Total variable selling cost / Total unit sale

Variable selling cost per unit = $2,250,000 / 1,000,000

Variable selling cost per unit = $2.25

Contribution margin per unit = Sales per unit - Variable cost per unit

Contribution margin per unit = Sales per unit - [Direct material per unit + Direct labor per unit + Variable selling cost per unit]

Contribution margin per unit = $22.50 - [$7 - $1.35 - $2.25]

Contribution margin per unit = $22.50 - [$10.6]

Contribution margin per unit = $11.90