Answer (A) is correct . Contribution margin equals revenues minus all variable costs. Given no WIP and no beginning finished goods, the contribution margin was $25,200 [900 units × ($100 – $30 – $20 – $10 – $12)]. The variable costs of producing the units not sold are embedded in ending inventory rather than expensed as part of cost of goods sold. The fixed costs are thus excluded from computation of the contribution margin.
Answer (B) is incorrect because The amount of $28,000 results from assuming the sale of 1,000 units.
Answer (C) is incorrect because The amount of $31,500 results from assuming a UCM of $35. This computation includes fixed unit selling costs of $5 but excludes the $12 per unit variable selling costs.
Answer (D) is incorrect because The amount of $35,000 results from assuming a UCM of $35 and sales of 1,000 units.
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The contribution margin earned by Richardson for the prior year was
