Bandito Company sells product XRP for $180 per unit. Overhead is allocated based on
direct labor hours. Bandito estimates overhead to be $600,000 per... Accounting MCQs | Accounting MCQs

Bandito Company sells product XRP for $180 per unit. Overhead is allocated based on
direct labor hours. Bandito estimates overhead to be $600,000 per month, which is 40%
variable and 60% fixed. Direct labor hours budgeted per month for the entire factory total
100,000 hours, and the hourly direct labor rate is $9. Product XRP requires $64 of direct
material per unit and 2 hours of direct labor. Bandito has begun using throughput costing. If
Bandito produces and sells 20,000 units of XRP this month, the total throughput contribution
is

$3,240,000$2,320,000$1,960,000$1,864,000Show Result

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Detailed Answer

Answer (B) is correct.
Throughput contribution per unit only considers the selling price per unit
and the direct materials. Throughput contribution does not consider
direct labor or any overhead. The throughput contribution per unit is
$116 ($180 – $64), so total throughput contribution is $2,320,000
($116 × 20,000 units).