short term decision making
donnas1977
Registered Posts: 182 ? ? ?
Can someone work the following for me on short term decision making. We have given the information below and also a sales forecast of 910,000 during the year,
Product robin
Budgeted sales and production 750,000
Machine hrs required 3,750,000
Sales revenue (£) 9,000,000
Direct materials (£) 2,250,000
Direct labour (£) 2,625,000
Variable overheads 1,500,000
Fixed costs 2,450,000
I got confused by the book how they got the contribution unit which i understand is selling price per unit – total variable cost per unit. The book gives the answer as £12 – (3+3.5+2) = 3.50.
where does this come from. I get my answer as 0.63 which doesn’t look right, can someone point me in the right direction?
Thanks
Donna
Product robin
Budgeted sales and production 750,000
Machine hrs required 3,750,000
Sales revenue (£) 9,000,000
Direct materials (£) 2,250,000
Direct labour (£) 2,625,000
Variable overheads 1,500,000
Fixed costs 2,450,000
I got confused by the book how they got the contribution unit which i understand is selling price per unit – total variable cost per unit. The book gives the answer as £12 – (3+3.5+2) = 3.50.
where does this come from. I get my answer as 0.63 which doesn’t look right, can someone point me in the right direction?
Thanks
Donna
0
Comments

 Add up the three variable costs
Direct materials (£) 2,250,000
Direct labour (£) 2,625,000
Variable overheads 1,500,000  Sales revenue less total variable cost = total contribution
 Divide the total contribution by the budgeted production
 = £3.50 contribution per unit
0  Add up the three variable costs

thanks, i knew i was missing another step somewhere0
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