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Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing and selling the product required $320,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and reduce direct labor costs to $2.80 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $23.40 per unit, which would decrease unit sales volume to 38,250 units. Required: 1. Compute the contribution margin per unit from (a) using the new material and (b) using the new material and increasing the selling price. (Round your answers to 2 decimal places.) Sales price per unit Variable costs per unit Direct materials Direct labor Variable overhead Variable selling & administrative expenses Variable costs per unit Contribution margin per unit With new material $ 5.00 4.00 0.50 0.30 $ With new material and price increase 0.00 $ 0.00

Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing and selling the product required $320,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and reduce direct labor costs to $2.80 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $23.40 per unit, which would decrease unit sales volume to 38,250 units. Required: 1. Compute the contribution margin per unit from (a) using the new material and (b) using the new material and increasing the selling price. (Round your answers to 2 decimal places.) Sales price per unit Variable costs per unit Direct materials Direct labor Variable overhead Variable selling & administrative expenses Variable costs per unit Contribution margin per unit With new material $ 5.00 4.00 0.50 0.30 $ With new material and price increase 0.00 $ 0.00

FINANCIAL ACCOUNTING
FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing and selling the product required $320,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and reduce direct labor costs to $2.80 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $23.40 per unit, which would decrease unit sales volume to 38,250 units. Required: 1. Compute the contribution margin per unit from (a) using the new material and (b) using the new material and increasing the selling price. (Round your answers to 2 decimal places.) Sales price per unit Variable costs per unit Direct materials Direct labor Variable overhead Variable selling & administrative expenses Variable costs per unit Contribution margin per unit With new material $ 5.00 4.00 0.50 0.30 $ With new material and price increase 0.00 $ 0.00
Transcribed Image Text:Burchard Company sold 45,000 units of its only product for $18.00 per unit this year. Manufacturing and selling the product required $320,000 of fixed costs. Its per unit variable costs follow. Direct materials Direct labor Variable overhead costs Variable selling and administrative costs For the next year, management will use a new material, which will reduce direct materials costs to $1.50 per unit and reduce direct labor costs to $2.80 per unit. Sales, total fixed costs, variable overhead costs per unit, and variable selling and administrative costs per unit will not change. Management is also considering raising its selling price to $23.40 per unit, which would decrease unit sales volume to 38,250 units. Required: 1. Compute the contribution margin per unit from (a) using the new material and (b) using the new material and increasing the selling price. (Round your answers to 2 decimal places.) Sales price per unit Variable costs per unit Direct materials Direct labor Variable overhead Variable selling & administrative expenses Variable costs per unit Contribution margin per unit With new material $ 5.00 4.00 0.50 0.30 $ With new material and price increase 0.00 $ 0.00
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Contribution margin per unit= Sales price - Variable costs per unit

The contribution margin is the amount generated by selling an additional product unit. 

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