[The following information applies to the questions displayed below.] Diego Company manufactures one product that is sold for $75 per unit in two geographic regions-the East and West regions. The following information pertains to the company's first year of operations in which it produced 46,000 units and sold 42,000 units. Variable costs per unit: Manufacturing: Direct materials Direct labor Variable manufacturing overhead Variable selling and administrative Fixed costs per year: Fixed manufacturing overhead Fixed selling and administrative expense $ 25 $ 20 $2 $4 Total contribution margin $ 644,000 $ 388,000 The company sold 31,000 units in the East region and 11,000 units in the West region. It determined that $200,000 of its fixed selling and administrative expense is traceable to the West region, $150,000 is traceable to the East region, and the remaining $38,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. 3. What is the company's total contribution margin under variable costing?

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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**Transcription:**

The following information applies to the question displayed below.

Diego Company manufactures one product that is sold for $75 per unit in two geographic regions—the East and West regions. The following information pertains to the company's first year of operations in which it produced 46,000 units and sold 42,000 units.

**Variable costs per unit:**
- Manufacturing:
  - Direct materials: $25
  - Direct labor: $20
  - Variable manufacturing overhead: $2
- Variable selling and administrative: $4

**Fixed costs per year:**
- Fixed manufacturing overhead: $644,000
- Fixed selling and administrative expense: $388,000

The company sold 31,000 units in the East region and 11,000 units in the West region. It determined that $200,000 of its fixed selling and administrative expense is traceable to the West region, $150,000 is traceable to the East region, and the remaining $38,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product.

**Question:**
3. What is the company's total contribution margin under variable costing?

Total contribution margin: [Blank space for answer]
Transcribed Image Text:**Transcription:** The following information applies to the question displayed below. Diego Company manufactures one product that is sold for $75 per unit in two geographic regions—the East and West regions. The following information pertains to the company's first year of operations in which it produced 46,000 units and sold 42,000 units. **Variable costs per unit:** - Manufacturing: - Direct materials: $25 - Direct labor: $20 - Variable manufacturing overhead: $2 - Variable selling and administrative: $4 **Fixed costs per year:** - Fixed manufacturing overhead: $644,000 - Fixed selling and administrative expense: $388,000 The company sold 31,000 units in the East region and 11,000 units in the West region. It determined that $200,000 of its fixed selling and administrative expense is traceable to the West region, $150,000 is traceable to the East region, and the remaining $38,000 is a common fixed expense. The company will continue to incur the total amount of its fixed manufacturing overhead costs as long as it continues to produce any amount of its only product. **Question:** 3. What is the company's total contribution margin under variable costing? Total contribution margin: [Blank space for answer]
Expert Solution
Step 1

 

CONTRIBUTION MARGIN

 

Contribution Margin per unit is Computed by deducting Total Variable Cost per unit From Selling Cost per unit. 

Total Contribution Margin is Computed by Multiplying Total No. Of Units Sold From Contribution Margin Per unit.

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