Reference no: EM132601567

Fixed and Variable Cost

Stuart Manufacturing produces metal picture frames. The company's income statements for the last two years are given below:

                                               Last year                        This year

Units sold.                                  50,000                         70,000

Sales                                        $800,000                       $1,120,000

Cost of goods sold                       550,000                        710,000

Gross margin                               250,000                       410,000

Selling and administrative expense   150,000                       190,000

Net operating income                     $100,000                     $ 220,000

The company has no beginning or ending inventories.

Required:

Question 1: Estimate the company's total variable cost per unit and its total fixed costs per year. (Remember that this is a manufacturing firm.)

Question 2: Compute the company's contribution margin for this year.