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9 November, 04:39

Gabby Company sells a product for $ 100 per unit. Variable costs are $ 60 per unit, and fixed costs are $ 2 comma 500 per month. The company expects to sell 600 units in September. Calculate the contribution margin per unit, in total, and as a ratio.

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  1. 9 November, 05:00
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    (a) $40

    (b) $24,000

    (c) 40%

    Explanation:

    Given that,

    Selling price = $100 per unit

    Variable costs = $60 per unit

    Fixed costs = $2,500 per month

    Contribution margin per unit:

    = Selling price - Variable costs

    = $100 per unit - $60 per unit

    = $40

    Total Contribution margin:

    = Contribution margin per unit * No. of units sold

    = $40 * 600 units

    = $24,000

    Contribution margin ratio:

    = (Selling price - Variable costs) : Selling price

    = ($100 per unit - $60 per unit) : $100 per unit

    = 0.4 or 40 %
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