Super-Tees Company plans to sell 12,000 T-shirts at $16 each in the coming year. Product costsinclude: Direct materials per T-shirt $5.75Direct labor per T-shirt $1.25Variable overhead per T-shirt $0.60Total fixed factory overhead $43,000 Variable selling expense is the redemption of a coupon, which averages $0.80 per T-shirt; fixed selling and administrative expenses total $19,000.Required:1. Calculate the:a. Variable product cost per unitb. Total variable cost per unitc. Contribution margin per unitd. Contribution margin ratio (rounded to four significant digits)e. Total fixed expense for the year2. Prepare a contribution-margin-based income statement for Super-Tees Company for thecoming year.3. What if the per unit selling expense increased from $0.80 to $1.75? Calculate the new valuesfor the following:a. Variable product cost per unitb. Total variable cost per unitc. Contribution margin per unitd. Contribution margin ratio (rounded to four significant digits)e. Total fixed expense for the year
Cost-Volume-Profit Analysis
Cost Volume Profit (CVP) analysis is a cost accounting method that analyses the effect of fluctuating cost and volume on the operating profit. Also known as break-even analysis, CVP determines the break-even point for varying volumes of sales and cost structures. This information helps the managers make economic decisions on a short-term basis. CVP analysis is based on many assumptions. Sales price, variable costs, and fixed costs per unit are assumed to be constant. The analysis also assumes that all units produced are sold and costs get impacted due to changes in activities. All costs incurred by the company like administrative, manufacturing, and selling costs are identified as either fixed or variable.
Marginal Costing
Marginal cost is defined as the change in the total cost which takes place when one additional unit of a product is manufactured. The marginal cost is influenced only by the variations which generally occur in the variable costs because the fixed costs remain the same irrespective of the output produced. The concept of marginal cost is used for product pricing when the customers want the lowest possible price for a certain number of orders. There is no accounting entry for marginal cost and it is only used by the management for taking effective decisions.
Super-Tees Company plans to sell 12,000 T-shirts at $16 each in the coming year. Product costs
include:
Direct materials per T-shirt $5.75
Direct labor per T-shirt $1.25
Variable
Total fixed factory overhead $43,000
Variable selling expense is the redemption of a coupon, which averages $0.80 per T-shirt; fixed selling and administrative expenses total $19,000.
Required:
1. Calculate the:
a. Variable product cost per unit
b. Total variable cost per unit
c. Contribution margin per unit
d. Contribution margin ratio (rounded to four significant digits)
e. Total fixed expense for the year
2. Prepare a contribution-margin-based income statement for Super-Tees Company for the
coming year.
3. What if the per unit selling expense increased from $0.80 to $1.75? Calculate the new values
for the following:
a. Variable product cost per unit
b. Total variable cost per unit
c. Contribution margin per unit
d. Contribution margin ratio (rounded to four significant digits)
e. Total fixed expense for the year
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