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Vaswani Company provides the following information for their first year of operations:
Sales, 5,000 units @ $10 each; total production, 7,500 units
Selling and administrative costs.
Fixed, $1,000; Variable, $1 per unit.Production costs per unit.Direct materials, $2; Direct labor, $2; Variable overhead, $1Fixed manufacturing overhead, $7,500If Vaswani uses direct costing, how much is the contribution margin?
Discuss the impact that other factors might have. For example, would increasing the quantity of inventory increase costs? Would a salary cut affect employee morale? Would decreased morale affect sales?
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