Price $21.00 Direct Materials $6.00 Direct Labor $1.80 Var. MOH $0.80 Fixed MOH $36,000 Selling $2.00 Administrative $60,000 1. What is the contribution margin per unit? $8.60, $2.99, $7.59, $10.60, or $4.99 2. What is the contribution margin ratio? 0.3672, 0.6328, 0.7800, 0.2200, or 0.4415 3. Based on your answer from (b), how much of every $1.00 of sales represents variable costs? 4. If direct labor costs increase by $1.00, how will that affect the contribution margin?
Variance Analysis
In layman's terms, variance analysis is an analysis of a difference between planned and actual behavior. Variance analysis is mainly used by the companies to maintain a control over a business. After analyzing differences, companies find the reasons for the variance so that the necessary steps should be taken to correct that variance.
Standard Costing
The standard cost system is the expected cost per unit product manufactured and it helps in estimating the deviations and controlling them as well as fixing the selling price of the product. For example, it helps to plan the cost for the coming year on the various expenses.
Spartans Inc. has the following
per unit per year
Price $21.00
Direct Materials $6.00
Direct Labor $1.80
Var. MOH $0.80
Fixed MOH $36,000
Selling $2.00
Administrative $60,000
1. What is the contribution margin per unit? $8.60, $2.99, $7.59, $10.60, or $4.99
2. What is the contribution margin ratio? 0.3672, 0.6328, 0.7800, 0.2200, or 0.4415
3. Based on your answer from (b), how much of every $1.00 of sales represents variable costs?
4. If direct labor costs increase by $1.00, how will that affect the contribution margin?
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