A company is preparing it cost budgets for the forthcoming financial year. Thr company produces a single product,which it is expecting to sell at $150 per unit. Based on annual sales and output of 2000 units, estimated costs are:
$’000
Direct material 41
Direct wages 38
Variable production overhead 37
Fixed production overhead 40
Variable selling overhead 10
Fixed administration overhead 50
Total 216
If marginal costing is applied, what is the total contribution?
A. $156000
B. $174000
C. $144000
D. $84000
My anwer:
Direct marerial $41
Direct wages $38
Variable production Overhead $37
Variable selling overhead $10
Cost per unit= $126
2000 units x $126 = $252,000
Sales = 2000 units $150 = $300,000
Contribution = $300,000 - $252,000
=$48,000
Can somebody plz explain where i went wrong. Thanks
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Marginal costing and Contribution
9y ago#1The amounts given are in 000 so are presumable not per unit.
Variable costs = 126,000
Revenue = 300,000
Contribution = 174,000
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