A regional bakery, Aunt Bird’s Goodies, normally produces 200,000 pies per year in the Pie Department. The cost report

Direct materials, supplies used, and direct labor are the only costs that vary with production. Plant-wide costs (utilities, insurance, taxes, and rent) have been allocated to the Pie Department based on the space occupied by pie making.

Required:
1. Determine variable costs, direct fixed costs, and allocated costs per unit.
2. Ifa pie sells for $2.90:
(a) What is the variable contribution margin per pie? ratio? in total?
(b) What is the direct contribution margin?
(c) What is the gross margin from selling pies?
3. Assume that next year only 150,000 pies will be manufactured. Find the price
needed just to cover total product costs.

Transcribed Image Text:

Direct materials Direct labor Supervision Supplies used Depreciation on pie department equipment Telephone expenses Other pie department expenses Utilities, insurance, and taxes Rent Total costs $ 93,000 91,000 135,000 36,000 32,000 8,000 25,000 52,000 48,000 $520,000