If the variable cost of goods sold totaled $80,000 for the year (16,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,250 (15,000 units at $5.75 each), the effect of the unit cost factor on the change in contribution margin is:
A) $12,000 increase
B) $5,750 decrease
C) $12,000 decrease
D) $5,750 increase

Question

Quizplus · Accepted Answer

The unit cost factor is the difference between the actual unit cost and the planned unit cost. In this case, the actual unit cost is $5.00 and the planned unit cost is $5.75. The difference is $0.75. The effect of the unit cost factor on the change in contribution margin is the difference between the actual variable cost of goods sold and the planned variable cost of goods sold, multiplied by the unit cost factor. In this case, the actual variable cost of goods sold is $80,000 and the planned variable cost of goods sold is $86,250. The difference is $6,250. The unit cost factor is $0.75. The effect of the unit cost factor on the change in contribution margin is $6,250 x $0.75 = $12,000.

If the Variable Cost of Goods Sold Totaled $80,000 for the Year