Cost Accounting (15th Edition)

Published by Prentice Hall
ISBN 10: 0133428702
ISBN 13: 978-0-13342-870-4

Chapter 9 - Inventory Costing and Capacity Analysis - Assignment Material - Problems - Page 368: 9-38(1)

Answer

Iron City's total contribution margin for 2014 is $963,000.

Work Step by Step

To calculate the total contribution margin, we need to determine the variable cost of goods sold (COGS) and then subtract it from the sales revenue: Total Contribution Margin = Sales Revenue - Variable COGS - Variable Nonmanufacturing Expenses Given: Sales Revenue = \$2,250,000 Variable Nonmanufacturing Expenses = \$0 First, we need to find the unit cost of goods sold under variable costing, which is the same as the cost of ending inventory since there are no beginning inventories: Unit Cost of Goods Sold = Ending Inventory Cost / Units Sold Unit Cost of Goods Sold = \$7.15 (given ending inventory cost) / 180,000 units (units sold) Unit Cost of Goods Sold = \$7.15 Now, we can calculate the variable COGS: Variable COGS = Units Sold × Unit Cost of Goods Sold Variable COGS = 180,000 units $\times$ \$7.15 Variable COGS = \$1,287,000 Total Contribution Margin = \$2,250,000 - \$1,287,000 - \$0 Total Contribution Margin = \$963,000
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