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30 October, 00:22

Macy Corporation's relevant range of activity is 8,100 units to 16,500 units. When it produces and sells 12,300 units, its average costs per unit are as follows: Average Cost per Unit Direct materials $ 5.50 Direct labor $ 3.95 Variable manufacturing overhead $ 1.95 Fixed manufacturing overhead $ 3.40 Fixed selling expense $ 1.25 Fixed administrative expense $ 0.95 Sales commissions $ 1.20 Variable administrative expense $ 0.85 If the selling price is $32.00 per unit, the contribution margin per unit sold is closest to:

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  1. 30 October, 00:25
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    Contribution margin per unit = $18.55

    Explanation:

    Contribution margin = Net sales value - Variable cost per unit.

    Variable cost per unit will be same as that of average variable cost, as is completely proportional to number of units.

    Variable cost is 100% avoidable for the units not produced.

    Thus,

    Total Variable cost per unit shall be:

    Direct material = $5.50

    Direct Labor = $3.95

    Variable manufacturing overhead = $1.95

    Sales Commission = $1.20

    Variable administrative expense = $0.85

    Total variable cost = $13.45

    Selling price per unit = $32.00

    Therefore, contribution margin per unit = $32 - $13.45 = $18.55
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