Norfolk Engineering, which has only one product, has provided the following data concerning its most recent month of operations:
-The demand for last month was very good and nearly all of its competitors increased their selling prices. Calculate the total contribution margin for the month under the variable costing approach if the selling price had been increased to £155.

A)£176,600
B)£183,600
C)£166,600
D)£189,600

Question

Norfolk Engineering, which has only one product, has provided the following data concerning its most recent month of operations:
-The demand for last month was very good and nearly all of its competitors increased their selling prices. Calculate the total contribution margin for the month under the variable costing approach if the selling price had been increased to £155.

A)£176,600 
B)£183,600 
C)£166,600 
D)£189,600

Quizplus · Accepted Answer

First, we need to calculate the contribution margin per unit:

Selling price per unit = £155 
Variable cost per unit = £110

Contribution margin per unit = Selling price per unit - Variable cost per unit 
= £155 - £110 
= £45

Next, we need to calculate the total contribution margin for the month:

Number of units sold = 4,080 
Total contribution margin = Contribution margin per unit x Number of units sold 
= £45 x 4,080 
= £183,600

Therefore, the total contribution margin for the month under the variable costing approach if the selling price had been increased to £155 is £183,600. Option B is the correct answer.

Norfolk Engineering, Which Has Only One Product, Has Provided the Following