managerial accounting

Ladanza Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $188.00 per unit.

Sales volume (units)	11,800	13,300
Cost of sales	$1,014,800	$1,143,800
Selling and administrative costs	$627,000	$667,500

The best estimate of the total contribution margin when 12,460 units are sold is:

	$310,170
	$934,500
	$409,430
	$1,048,530

Using the high-low method to estimate variable components of the costs:
Variable cost of sales = Change in cost ÷ Change in activity
= ($1,143,800 - $1,014,800) ÷ (13,300 units - 11,800 units)
= $129,000 ÷ 1,500 units
= $86.00 per unit
Variable selling and administrative cost = Change in cost ÷ Change in activity
= ($667,500 - $627,000) ÷ (13,300 units - 11,800 units)
= $40,500 ÷ 1,500 units
= $27.00 per unit
Total variable cost per unit = Variable cost of sales + Variable selling and administrative cost
= $86.00 per unit + $27.00 per unit = $113.00 per unit
Contribution margin per unit = Selling price per unit - Total variable cost per unit
Total contribution margin = Contribution margin per unit × Total unit sales
= $75.00 per unit × 12,460 units = $934,500

Multiple Choice	Learning Objective: 02-03 Understand cost behavior patterns including variable costs, fixed costs, and mixed costs.	Learning Objective: 02-05 Prepare income statements for a merchandising company using the traditional and contribution formats.
Difficulty: Hard	Learning Objective: 02-04 Analyze a mixed cost using a scattergraph plot and the highlow method.