Asked by
Shagun Tungal
on Dec 15, 2024
Verified
A new product is expected to sell for $20. The company would manufacture up to 46,500 units at a variable cost of $8 per unit. Fixed costs would be $220,000. Variable selling and administration expenses would amount to $3. Determine the contribution margin per unit and contribution margin rate.
A) Per unit CM $9.00; CM rate = .45
B) Per unit CM $9.50; CM rate = .47
C) Per unit CM $9.75; CM rate = .49
D) Per unit CM $10.00; CM rate = .51
E) Per unit CM $10.50; CM rate = .53
Contribution Margin
The difference between sales revenue and variable costs of a product or service, used to cover fixed costs and to generate profit.
Fixed Costs
Costs that do not change with the level of production or business activity, such as rent, salaries, and insurance premiums.
- Ascertain the per-item contribution margin and its associated ratio to gauge the economic viability of a product.
- Understand the concept of cost-volume-profit (CVP) analysis and its importance in business decision-making.
Verified Answer
BE
Learning Objectives
- Ascertain the per-item contribution margin and its associated ratio to gauge the economic viability of a product.
- Understand the concept of cost-volume-profit (CVP) analysis and its importance in business decision-making.