The mining division of Hill End Mining could sell its ore at a market price of $265 per tonne, incurring an additional $15 per tonne in selling costs. Consequently, they decide to sell 500,000 tonne of ore to the Metals division at the market price. Mining division Metals division $ $ Selling price 265 650 Less: Variable costs: Direct material 32 30 Direct labour 65 60 Variable Manufacturing overhead 71 28 Transfer price – must be added If the metals division sell its 500,000 tonne of steel for $650 per tonne and using the above information the total contribution margin for each division would be: a. Mining division: $36,750,000 and Metals division: $112,500,000 b. Mining division: $32,000,000 and Metals division: $112,500,000 c. Mining division: $48,562,500 and Metals division: $130,000,000 d. Mining division: $48,562,500 and Metals division $133,500,000
The mining division of Hill End Mining could sell its ore at a market price of $265 per tonne, incurring an additional $15 per tonne in selling costs. Consequently, they decide to sell 500,000 tonne of ore to the Metals division at the market price.
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|
Mining division |
Metals division |
|
$ |
$ |
|
|
Selling price |
265 |
650 |
|
Less: Variable costs: |
||
|
Direct material |
32 |
30 |
|
Direct labour |
65 |
60 |
|
Variable Manufacturing |
71 |
28 |
|
Transfer price |
– |
must be added |
If the metals division sell its 500,000 tonne of steel for $650 per tonne and using the above information the total contribution margin for each division would be:
a. Mining division: $36,750,000 and Metals division: $112,500,000
b. Mining division: $32,000,000 and Metals division: $112,500,000
c. Mining division: $48,562,500 and Metals division: $130,000,000
d. Mining division: $48,562,500 and Metals division $133,500,000
Answer:-
Contribution margin meaning:- A gross or per unit basis might be used to express the contribution margin. It indicates the additional revenue for each product or unit sold after the variable element of the business's costs have been subtracted. The selling price per unit less the variable cost per unit is the contribution margin.
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