Marginal costing and Contribution

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August 21, 2016 at 8:31 pm #334415
vashti123
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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
August 25, 2016 at 1:36 pm #335144
Ken Garrett
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The 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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