Answer the following question(s)using the information below.Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation, 2,000 units were produced and 1,750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:

-What is contribution margin using variable costing?
A)$96,250
B)$91,000
C)$84,000
D)$78,750
E)$52,500

Question

Answer the following question(s)using the information below.Peggy's Pillows produces and sells a decorative pillow for $75.00 per unit.In the first month of operation, 2,000 units were produced and 1,750 units were sold.Actual fixed costs are the same as the amount budgeted for the month.Other information for the month includes:
 
-What is contribution margin using variable costing?
A)$96,250 
B)$91,000 
C)$84,000 
D)$78,750 
E)$52,500

Quizplus · Accepted Answer

Contribution margin using variable costing can be calculated as follows:
Contribution margin = Sales - Variable costs

Variable costs per unit:
Direct materials = $18.00
Direct labor = $6.00
Variable manufacturing overhead = $3.00

Total variable cost per unit = $18.00 + $6.00 + $3.00 = $27.00

Total variable costs for 1,750 units sold = $27.00 x 1,750 = $47,250

Contribution margin = ($75.00 x 1,750) - $47,250 = $78,750

Therefore, the answer is D).

Answer the Following Question(s)using the Information Below