PFA Ltd uses a throughput costing system and reported the following information for its first month of operations: Units produced…………………………………..140
Units sold………………………………………..120
Material cost per unit produced……………….$3.50
Conversion cost per unit produced……………$6.50
Fixed period costs per unit produced………….$6.00
Variable period costs per unit produced………$4.00
Selling price per unit…………………………$25.00
PFA's throughput contribution was
A) $3,000
B) $3,500
C) $2,580
D) $1,800

Question

Quizplus · Accepted Answer

To calculate the throughput contribution, we need to subtract the direct material and direct conversion costs per unit from the selling price per unit.

Direct material cost per unit = $3.50
Direct conversion cost per unit = $6.50
Total direct costs per unit = $3.50 + $6.50 = $10.00

Throughput contribution per unit = Selling price per unit – Total direct costs per unit
= $25.00 - $10.00
= $15.00

Total throughput contribution = Throughput contribution per unit x Units sold
= $15.00 x 120
= $1,800

Therefore, the answer is C.

PFA Ltd Uses a Throughput Costing System and Reported the Following