MANAGERIAL ACCOUNTING: Fixed and Variable Cost

MANAGERIAL ACCOUNTING: Fixed and Variable Cost

Fixed and Variable Cost

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Stuart Manufacturing produces metal picture frames. The company’s income statements for the last two years are given below:

Last year

This year

Units sold ……………………………………………

50,000

70,000

Sales …………………………………………………..

$800,000

$1,120,000

Cost of goods sold ……………………………….

550,000

710,000

Gross margin ………………………………………

250,000

410,000

Selling and administrative expense ………..

150,000

190,000

Net operating income …………………………..

$100,000

$ 220,000

The company has no beginning or ending inventories.

Required:

a. Estimate the company’s total variable cost per unit and its total fixed costs per year. (Remember that this is a manufacturing firm.)

b. Compute the company’s contribution margin for this year.

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