Rocky Mountain Bottling Company produces a soft drink that is sold for a dollar. At production and sales of 800,000 units, the company pays $600,000 in production costs, half of which are fixed costs. At that volume, general, selling, and administrative costs amount to $250,000 of which $70,000 are fixed costs. What is the amount of contribution margin per unit? a. $0.400 b. $0.5375 c. $0.250 d. None of these is correct.

Question

Business

Jovanny Farrell

12 April, 06:06

Rocky Mountain Bottling Company produces a soft drink that is sold for a dollar. At production and sales of 800,000 units, the company pays $600,000 in production costs, half of which are fixed costs. At that volume, general, selling, and administrative costs amount to $250,000 of which $70,000 are fixed costs. What is the amount of contribution margin per unit? a. $0.400 b. $0.5375 c. $0.250 d. None of these is correct.

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Answers (1)

Know the Answer?

Darian Blair · Answer 1

option (a) $0.400

Explanation:

Data provided in the question:

Selling cost = $1

Production and sales = 800,000 units

Production costs = $600,000

Fixed cost = 50% of $600,000

= 300,000

General, selling, and administrative costs amount = $250,000

Fixed costs = $70,000

Now,

Variable Production costs per unit = Fixed cost : Production and sales

= 300,000 : 800,000

= $0.375

Variable General, selling, and administrative per unit

= ($250,000 - $70,000) : 800,000

= $0.225

Total variable expense per unit = $0.375 + $0.225

= $0.6

Therefore,

contribution margin per unit = Selling cost - Total variable cost

= $1 - $0.6

= $0.4

Hence,

The answer is option (a) $0.400