Concept Introduction:
Contribution approach:
The contribution approach calculates the net profit by calculating the contribution margin. The variable cost is deducted from the sales value to calculate the contribution margin. Further, the fixed cost is deducted from the contribution margin to calculate the contribution margin.
Requirement 1:
Calculate the contribution margin per pound of material used in each product.
Concept Introduction:
Contribution approach:
The contribution approach calculates the net profit by calculating the contribution margin. The variable cost is deducted from the sales value to calculate the contribution margin. Further, the fixed cost is deducted from the contribution margin to calculate the contribution margin.
Requirement 2:
Calculate the maximum contribution margin in case of an unlimited demand for each product.
Concept Introduction:
Contribution approach:
The contribution approach calculates the net profit by calculating the contribution margin. The variable cost is deducted from the sales value to calculate the contribution margin. Further, the fixed cost is deducted from the contribution margin to calculate the contribution margin.
Requirement 3:
Calculate the maximum contribution margin in case of limited demand for each product.
Concept Introduction:
Requirement 4:
Determine the highest price that Company B can pay for an additional pound of material.
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Chapter 7 Solutions
Managerial Accounting for Managers
- Preston Manufacturing uses a standard costing system that allows 2.5 pounds of direct materials for one finished unit. During August, the company purchased 35,000 pounds of direct materials for $175,000 and manufactured 12,600 finished units. The standard direct materials cost allowed for the units manufactured is $126,000. The performance report shows that Preston has an unfavorable direct materials usage variance of $5,040. Also, the company records any price variance for materials at time of purchase. The number of pounds of direct materials used to produce August's output was__ pounds. Helparrow_forwardWhat is the conversion cost per equivalent unitarrow_forwardPlease provide the solution to this general accounting question using proper accounting principles.arrow_forward
- Nonearrow_forwardGeneral accounting questionarrow_forwardMarvatek Ltd. estimates its factory overhead costs to be $45,600 and machine hours to be 6,000 for the year. If the actual hours worked on production total 5,700 and the actual factory overhead costs are $44,000, what is the amount of the over- or under-applied factory overhead?arrow_forward
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