(Appendix 5A) Callander Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $140.50 per unit.

-The best estimate of the total contribution margin when 6,300 units are sold is:
A) $75,600
B) $97,650
C) $362,880
D) $229,950

Question

(Appendix 5A) Callander Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $140.50 per unit.
 
-The best estimate of the total contribution margin when 6,300 units are sold is:
A) $75,600 
B) $97,650 
C) $362,880 
D) $229,950

Quizplus · Accepted Answer

Variable cost per unit = Change in cost ÷ Change in activity
= ($580,300 - $497,400) ÷ (7,000 units - 6,000 units)
= $82,900 ÷ 1,000 units
= $82.90 per unit
Selling and administrative costs:
Variable cost per unit = Change in cost ÷ Change in activity
= ($294,700 - $273,600) ÷ (7,000 units - 6,000 units)
= $21,100 ÷ 1,000 units
= $21.10 per unit
Total variable cost per unit = $82.90 per unit + $21.10 per unit = $104.00
Contribution margin per unit = Selling price per unit - Variable cost per unit
= $140.50 per unit - $104.00 per unit
= $36.50 per unit
Total contribution margin = Contribution margin per unit × Unit sales
= $36.50 per unit × 6,300 units
= $229,950

(Appendix 5A) Callander Corporation Is a Wholesaler That Sells a Single