Accounting Q: Laya Corporation produced 200,000 watches that it sold for $16 eac

Question

Accounting Q: Laya Corporation produced 200,000 watches that it sold for $16 each during 2012. The company determined that fixed manufacturing cost per unit was $7 per watch. The company reported a $800,000 gross margin on its 2011 financial statements.

I need to figure variable cost per unit: (If I had help with this, I could figure the other two, I think.

[ total variable cost:
total contribution margin:]
I have tried to follow the book example and the answer is not correct when I put it in? I do not understand what I am doing wrong.

Explanation / Answer

Total revenue = 200000*16 = $3200000

Fixed cost of watches, Fc = 200000*7 = $1400000

Variable cost be Vc

Gross margin = Revenue- Cost of the goods sold

$800,000 = $320,0000 - (Fc+Vc)

$800,000 = $3200,000 - ($1400,000+Vc)

Vc = $1000,000

Variable cost per unit = $1000,000/200000 = $5

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