Choice Creations, Inc. sells hand sewn shirts at $58.00 per shirt. It incurs monthly fixed costs $8000. The contribution margin ratio is calculated to be 30%. What is the variable cost per sh (Round any intermediate calculations and your final answer to two decimal places.) A) $58.00 per shirt B) $40.60 per shirt 9 $75.40 per shirt D) $17.40 p

Question

Business

Lana Suarez

29 July, 14:49

Choice Creations, Inc. sells hand sewn shirts at $58.00 per shirt. It incurs monthly fixed costs $8000. The contribution margin ratio is calculated to be 30%. What is the variable cost per sh (Round any intermediate calculations and your final answer to two decimal places.) A) $58.00 per shirt B) $40.60 per shirt 9 $75.40 per shirt D) $17.40 p

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Answers (1)

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Emmanuel Rich · Answer 1

Contribution margin ratio

= Contribution per unit

Selling price

= Selling price - Unit variable cost

Selling price

0.30 = $58 - Unit variable cost

$58

0.30 ($58) = $58 - Unit variable cost

$17.40 = $58 - Unit variable cost

Unit variable cost = $58 - $17.40

Unit variable cost = $40.60

The correct answer is B

Explanation:

In this case, we need to apply the formula for contribution margin ratio. Contribution margin ratio is the ratio of contribution per unit to selling price. Contribution per unit equals selling price minus variable cost per shirt. Contribution margin ratio and selling price were given with the exception of variable cost per shirt. Thus, variable cost per shirt is made the subject of the formula.