Question

Razor Inc. manufactures industrial components. One of its products used as a subcomponent in auto manufacturing is Fluoro2211. The selling price and cost per unit data for 9,000 units of Fluoro2211 are as follows. Per Unit Data Selling Price $150 Direct Materials 20 Direct Labor 15 Variable Manufacturing Overhead 12 Fixed Manufacturing Overhead 30 Variable Selling 3 Fixed Selling and Administrative 10 Total Costs 90 Operating Margin $60 During the next year, sales of Fluoro2211 are expected to be 10,000 units. All costs will remain the same except for fixed manufacturing overhead, which will increase by 20%, and material, which will increase by 10%. The selling price per unit for next year will be $160. Based on these data, Razor Inc.'s total contribution margin for next year will be: Group of answer choices $882,000. $980,000. $972,000. $1,080,000.

Answer 1

The total contribution margin for next year will be $1,100,000.

Step-by-step explanation:

To calculate the total contribution margin for next year, we need to consider the changes in cost and sales volume. First, let's calculate the total variable cost per unit for next year. The variable cost per unit includes the direct materials, direct labor, variable manufacturing overhead, and variable selling costs. Based on the given data, the total variable cost per unit for next year will be $20 (direct materials) + $15 (direct labor) + $12 (variable manufacturing overhead) + $3 (variable selling) = $50.

Next, we need to calculate the total fixed cost per unit for next year, which includes the fixed manufacturing overhead and fixed selling and administrative costs. Based on the given data, the total fixed cost per unit for next year will be $30 (fixed manufacturing overhead) + $10 (fixed selling and administrative) = $40.

Finally, we can calculate the total contribution margin per unit for next year by subtracting the variable cost per unit from the selling price per unit. Applying the given data, the total contribution margin per unit for next year will be $160 (selling price) - $50 (variable cost) = $110. To find the total contribution margin for next year, we multiply the total contribution margin per unit by the expected sales volume, which gives us $110 * 10,000 = $1,100,000.

Answer 2

d. $1,080,000

Step-by-step explanation:

Contribution per unit = Selling price per unit - Variable cost per unit

Contribution per unit = Selling price per unit - ( Direct Materials + Direct Labor + Variable Manufacturing Overhead + Variable Selling )

Contribution per unit = $160 - ($22 + $15+ $12 + $3)

Contribution per unit = $160 - $52

Contribution per unit = $108 per unit

Contribution margin for the next year = $108 per unit * 10,000

Contribution margin for the next year = $1,080,000