Asked by
Olyvia Brown
on Dec 15, 2024
Verified
A new product is expected to sell for $12. The company would manufacture up to 22,000 units at a variable cost of $5 per unit. Fixed costs would be $150,000. Variable selling and administration expenses would amount to $2.50. Determine the contribution margin per unit and contribution margin rate.
A) Per unit CM $4.50; CM rate = .375
B) Per unit CM $5.50; CM rate = .395
C) Per unit CM $6.50; CM rate = .415
D) Per unit CM $7.50; CM rate = .435
E) Per unit CM $8.50; CM rate = .455
Contribution Margin
The selling price per unit minus the variable cost per unit, reflecting the amount contributing to covering fixed costs.
Variable Cost
Costs that vary directly with the level of production or with the volume of services provided.
Fixed Costs
Constant expenses, such as rent, salaries, and insurance, that are not influenced by the quantity of production or sales.
- Calculate the per-unit contribution margin and the ratio of contribution margin to evaluate the profitability of a product.
- Comprehend the principles of cost-volume-profit (CVP) analysis and its significance in facilitating decisions within a business context.
Verified Answer
FT
Learning Objectives
- Calculate the per-unit contribution margin and the ratio of contribution margin to evaluate the profitability of a product.
- Comprehend the principles of cost-volume-profit (CVP) analysis and its significance in facilitating decisions within a business context.