Question

If variable cost of goods sold totaled $90,000 for the year (18,000 units at $5.00 each) and the planned variable cost of goods sold totaled $86,400 (16,000 units at $5.40 each), the effect of the quantity factor on the change in contribution margin is:

Answer 1

Answer:

$10,800

Explanation:

The computation of effect on the quantity factor is shown below:-

Actual variable cost = 18,000 × $5

= $90,000

Planned variable cost = 16,000 × $5.40

= $86,400

Total change in contribution margin = Actual variable cost - Planned variable cost

$90,000 - $86,400

= $3,600

Change in quantity = 18,000 - 16,000

= 2,000 units

Effect on the quantity factor = Change in quantity × Cost per unit

= 2,000 units × $5.40

= $10,800