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The answer states that contribution margin per unit is calculated by selling price - (direct material + direct labor + variable overhead + selling expense).
The answer states that contribution margin per unit is calculated by selling price - (direct material + direct labor + variable overhead + selling expense). And it states that the selling expense for standard product is $37.5 and enhanced product is $49.5. How do you calculate the selling expense per unit?
P19.38 LO 19.7 Introducing a new product: manufacturer EBP Ltd is a small firm involved in the production and sale of electronic business products. The company is well known for its attention to quality and innovation. During the past 15 months, a new product has been under development that allows users handheld access to email and video images. EBP named the product 'Wireless Wizard' and has been quietly designing two models: Standard and Enhanced. Development costs have amounted to $181 500 and $262 500, respectively. The total market demand for each model is expected to be 40000 units, and management anticipates being able to obtain the following market shares: Standard, 25 per cent; Enhanced, 20 per cent. Forecast data follow: Standard Enhanced $ 375.00 $495.00 Projected selling price Production cost per unit: Direct material Direct labour Variable overhead Fixed overhead Marketing and advertising per product linc Sales salaries per product line Sales commissions * Calculated on the basis of sales dollars. 42.00 22.50 36.00 54.00 195 000 85 500 10% 67.50 30.00 48.00 72.00 300 000 85500 10% CHAPTER NINETEEN INFORMATION FOR DECISIONS: RELEVANT COSTS AND BENEFITS 953 Since the start of development work on the Wireless Wizard, advances in technology have altered the market somewhat, and management now believes that the company can introduce only one of the two models. Consultants confirmed this fact not too long ago, with EBP paying $34 500 for an in-depth market study. Required: 1. Calculate the per unit contribution margin for both modelsStep by Step Solution
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