Reference no: EM132830758

Greenhorn Company makes and sells busts of Paciolo, the famous monk who is credited with the introduction of the double entry system of accounting. The normal selling price is $50. The company's costs for 2019, when it produced and sold 8,000 busts, were as follows:

Production costs:

Direct materials $12.50 per unit
Direct labor $15.00 per unit
Variable factory overhead $ 2.50 per unit
Fixed factory overhead $10.00 per unit

Selling and administrative expenses:

Sales commissions $ 2.50 per unit
Shipping $ 0.50 per unit
Fixed selling and adm exp $12.00 per unit

• This cost changes in total in proportion to changes in the number of busts produced and sold.
• The variable costs per unit are likely to remain the same in 2020. Total fixed costs are expected to increase by 30 percent. If the selling price is kept at $50 in 2020, the sales volume is expected to stay at 8,000 units. There was no beginning inventory in 2020. The income tax rate is 40 percent.

Problem 1. What type of cost are direct materials and direct labor? (Please answer "fixed" or "variable")

Problem 2. What type of cost are sales commissions and shipping? (Please answer "fixed" or "variable")

Problem 3. What is combined variable cost per unit?

Problem 4. What is total variable cost at 8000 units?

Problem 5. What is contribution margin per unit?