I have to create a contribution margin income statement (per unit) and need to determine how many burgers per hour I think the chef can make, so I can get the Direct Labor cost per burger. How do I find the Direct Labor cost, and where would that be located on a contribution margin income statement. I understand that it goes under fixed costs, but if i was making a chart do I have to put the actual amount of burgers that I think the chef could make as a fixed cost?

Question

I have to create a contribution margin income statement (per unit) and need to determine how many burgers per hour I think the chef can make, so I can get the Direct Labor cost per burger. How do I find the Direct Labor cost, and where would that be located on a contribution margin income statement. I understand that it goes under fixed costs, but if i was making a chart do I have to put the actual amount of burgers that I think the chef could make as a fixed cost?

Answer 1

this is not an answer but i need help doing my home work to night in my accounting could some one please help me i am way be hind and need to turn it all in tomorrow please

Answer 2

To find the Direct Labor cost per burger, you need to determine how many burgers the chef can make per hour. Here's how you can calculate it:

1. Determine the chef's hourly wage: Find out how much the chef earns per hour.

2. Calculate the time it takes to make one burger: Observe or ask the chef how long it takes them to make one burger.

3. Divide the hourly wage by the time per burger: Divide the chef's hourly wage by the time it takes to make one burger. This will give you the Direct Labor cost per burger.

Once you have the Direct Labor cost per burger, you can include it on the contribution margin income statement. Here's how it could be presented:

1. Sales Revenue: Total sales revenue from selling burgers.
2. Variable Costs: Costs that vary with the production and sale of each burger, such as the cost of ingredients.
3. Direct Labor: The labor cost per burger, which you calculated using the method mentioned above. This cost is generally considered a variable cost because it varies with the number of burgers produced.
4. Contribution Margin: Sales Revenue minus Variable Costs. This represents the contribution each burger makes towards covering fixed costs and generating profit.
5. Fixed Costs: Costs that do not vary with the number of burgers produced, such as rent, utilities, and equipment maintenance.
6. Net Income: Contribution Margin minus Fixed Costs. This is the profit generated from selling burgers.

Note that in a chart, you would generally include the Direct Labor cost per burger as a separate line item under Variable Costs, rather than as a fixed cost. This is because the labor cost varies with the production of each burger and is more accurately categorized as a variable cost.