The Adept Co. is analyzing a proposed project. The company expects to sell 3,300 units, give or take 4 percent. The expected variable cost per unit is $11 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 2 percent range. The depreciation expense is $2,000. The sale price is estimated at $19 a unit, give or take 2 percent. What is the contribution margin under the expected case scenario

Question

Business

Ashlyn Olson

19 March, 20:56

The Adept Co. is analyzing a proposed project. The company expects to sell 3,300 units, give or take 4 percent. The expected variable cost per unit is $11 and the expected fixed costs are $12,500. Cost estimates are considered accurate within a plus or minus 2 percent range. The depreciation expense is $2,000. The sale price is estimated at $19 a unit, give or take 2 percent. What is the contribution margin under the expected case scenario

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Joanna Walsh · Answer 1

The contribution margin under the expected case scenario is $8

Explanation:

In this question, we are asked to calculate the contribution margin under the expected case scenario.

Mathematically the contribution margin can be calculated using the formula below;

Contribution margin:

= Sale price per unit-Variable cost per unit

From the question, we can identify that the sale price per unit is $19 while the variable cost per unit is $11. We plug these values into the equation to yield;

Contribution margin = $19 - $11 = $8