Duck Company produces a product which sells for $40. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is paid on each unit sold. The contribution margin per unit is:Multiple Choice$22$16$7$17

Question

Business

Lizeth Pope

5 December, 18:36

Duck Company produces a product which sells for $40. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is paid on each unit sold. The contribution margin per unit is:Multiple Choice$22$16$7$17

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Answers (1)

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Chad Pearson · Answer 1

Contribution margin = $16

Explanation:

Contribution is the difference between the selling price and the variable cost.

Contribution margin = (Sales - variable cost)

Variable cost = Variable manufacturing + Variable selling cost

Variable cost = 18 + (15% * 40) = 24

Contribution margin = 40 - 24 = $16

Contribution margin = $16