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Variable Costs, Contribution Margin, Contribution Margin Ratio

Super-Tees Company plans to sell 16,000 T-shirts at $18 each in the coming year. Product costs include:

Direct materials per T-shirt	$6.30
Direct labor per T-shirt	$1.26
Variable overhead per T-shirt	$0.54
Total fixed factory overhead	$35,000

Variable selling expense is the redemption of a coupon, which averages $0.90 per T-shirt; fixed selling and administrative expenses total $17,000.

Required:

1. Calculate the following values: Round dollar amounts to the nearest cent and round ratio values to three decimal places (express the ratio as a decimal rather than a percentage).

a. Variable product cost per unit
b. Total variable cost per unit
c. Contribution margin per unit
d. Contribution margin ratio
e. Total fixed expense for the year

2. Prepare a contribution-margin-based income statement for Super-Tees Company for the coming year. If required, round your per unit answers to the nearest cent.

Super-Tees Company Contribution-Margin-Based Operating Income Statement For the Coming Year

	Total	Per Unit
Sales Total contribution margin Total fixed expense Total variable expense
Sales Total contribution margin Total fixed expense Total variable expense
Sales Total contribution margin Total fixed expense Total variable expense
Sales Total contribution margin Total fixed expense Total variable expense
Operating income Operating loss Sales Total contribution margin

3. What if the per unit selling expense increased from $0.90 to $1.95? Calculate new values for the following: Round dollar amounts to the nearest cent and round ratio values to four decimal places (express the ratio as a decimal rather than a percentage):

a. Variable product cost per unit
b. Total variable cost per unit
c. Contribution margin per unit
d. Contribution margin ratio
e. Total fixed expense for the year

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