Burchard Company sold 36,000 units of its only product for $16.20 per unit this year. Manufacturing and selling the product required $302,000 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 $1.23 per unit and reduce direct labor costs to $2.17 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 $21.06 per unit, which would decrease unit sales volume to 30,600 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. Note: 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 $4.10 3.10 0.41 0.21 $ With new material and price increase 0.00 $ 0.00
Burchard Company sold 36,000 units of its only product for $16.20 per unit this year. Manufacturing and selling the product required $302,000 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 $1.23 per unit and reduce direct labor costs to $2.17 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 $21.06 per unit, which would decrease unit sales volume to 30,600 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. Note: 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 $4.10 3.10 0.41 0.21 $ With new material and price increase 0.00 $ 0.00
Chapter1: Financial Statements And Business Decisions
Section: Chapter Questions
Problem 1Q
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Transcribed Image Text:Burchard Company sold 36,000 units of its only product for $16.20 per unit this year. Manufacturing and selling the
product required $302,000 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 $1.23 per unit and
reduce direct labor costs to $2.17 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
$21.06 per unit, which would decrease unit sales volume to 30,600 units.
2. Prepare a contribution margin income statement for next year with two columns showing the expected results of (a) using the new
material and (b) using the new material and increasing the selling price.
BURCHARD COMPANY
Contribution Margin Income Statement
Number of units:
With new material
$
36,000
0
With new
material and
price increase
0 $
$ 4.10
3.10
0.41
0.21
30,600
0
0
Transcribed Image Text:Burchard Company sold 36,000 units of its only product for $16.20 per unit this year. Manufacturing and selling the
product required $302,000 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 $1.23 per unit and
reduce direct labor costs to $2.17 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
$21.06 per unit, which would decrease unit sales volume to 30,600 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.
Note: 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
$
$4.10
3.10
0.41
0.21
0.00
With new material
and price
increase
$
0.00
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