The Following Costs Have Been Estimated Based on Sales of 30,000

question 149

Multiple Choice

The following costs have been estimated based on sales of 30,000 units:
$$\begin{array} { | l | r | r | } \hline & \begin{array} { r } \text { Total Annual } \\\text { Costs }\end{array} & \begin{array} { r } \text { Percent That Is } \\\text { Variable }\end{array} \\\hline \text { Direct materials } & \$ 300,000 & 100 \% \\\hline \text { Direct labor } & 250,000 & 100 \\\hline \begin{array} { l } \text { Manufacturing } \\\text { overhead }\end{array} & 250,000 & 50 \\\hline \begin{array} { l } \text { Selling and } \\\text { administrative }\end{array} & 150,000 & 25 \\\hline\end{array}$$ What selling price will yield a contribution margin of 40%?

• A) $59.38
• B) $43.75
• C) $39.58
• D) $33.25

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Definitions:

Gross Profit

This is the financial gain made after subtracting the cost of goods sold from the revenue generated from sales, before deducting any operational expenses.

Sales Revenue

The total income generated from the sale of goods or services before any costs or expenses are deducted.

Costs Of Goods Sold

An accounting term that denotes the direct costs attributable to the production of the goods sold by a company.

Break-even Point

The point at which total costs and total revenue are equal, meaning no net loss or gain, and a key financial analysis metric for businesses.