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  • Apr 6, 2007, 01:50 AM
    Samson500
    Variable Costs and Contribution Margin analysis
    Not sure if anyone can help me out with this, but I am trying to work out the variable costs and contribution margin per pot for a company that sells Terracotta pots. I only have the following information:

    A manufacturing company sells Terracotta pots for $4-80 each.

    The following costs have been determined by the company for the foreseeable future:
    Plastic raw material $1.00 per kilo.
    Electricity $1.40 per moulding machine hour.
    Machine operator labour $14.00 per hour.
    Rent on premises $1000.00 per month.
    Manager's salary $2500.00 per month.
    Transport and distribution $0.40 per pot.

    The Terracotta pots require 1.5 kilos of raw meterial each.
    The pots can be produced at 14 per moulding machine hour.

    The questions are:

    Calculate the variable costs per pot, and
    What is the contribution margin per pot.

    Thanks if anyone can help with this.

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