A Product Sells for $5, and Has Unit Variable Costs

question 194

Multiple Choice

A product sells for $5, and has unit variable costs of $3. The annual sales units for this product are 5,000. The firm has a total annual sales revenue of $60,000. When performing multiproduct break-even analysis, what is the weighted contribution of this product?

• A) 0.133
• B) 0.083
• C) 0.167
• D) 0.417
• E) $1.667

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Definitions:

Production

The process of creating goods or services by combining labor, materials, and machinery.

Predetermined Overhead Rate

A rate used to allocate manufacturing overhead costs to products by estimating overhead costs before production begins.

Machine Hours

Machine Hours represent a measure of the amount of time a machine is operated, used in costing, and operational efficiency analysis.

Over/Underapplied Overhead

The difference between the actual overhead costs incurred and the overhead costs allocated to production, indicating whether the allocated amount was too high or too low.