Refer to the information about Ramort Company in QS 19-5. If Ramort doubles its production to 40,000 units while sales remain at the current 20,000-unit level, by how much would the company’s contribution margin increase or decrease under variable costing?
The contribution margin of the company will decrease by $660,000.
Contribution margin refers to the amount left with a business organization after recovering all the variable costs from its sales revenue. The contribution margin is computed by deducting variable expenses from revenues.
Less: Variable costs:
Direct material (40000*10)
Direct labor (40000*12)
Variable overhead (40000*3)
Variable selling and administration cost (40000*2)
Refer to the information in QS 19-16. The company sells its product for $50 per unit. Due to new regulations, the company must now incur $2 per unit of hazardous waste disposal costs and $8,500 per year of fixed hazardous waste disposal costs. Compute the contribution margin per unit, including hazardous waste disposal costs.
Refer to the information in Exercise 19-1. Assume instead that Trio Company uses variable costing.
1. Compute the product cost per unit using variable costing.
2. Determine the cost of ending finished goods inventory using variable costing.
3. Determine the cost of goods sold using variable costing.
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