Question

A cement manufacturer has supplied the following data: Tons of cement produced and sold 225,000 Sales revenue $ 1,035,000 Variable manufacturing expense $ 421,000 Fixed manufacturing expense $ 280,000 Variable selling and administrative expense $ 29,000 Fixed selling and administrative expense $ 220,000 Net operating income $ 85,000 What is the company's unit contribution margin?

Answer 1

Answer: $2.6

Explanation: As we know that, contribution is the difference between the selling price and the variable cost. Thus, contribution margin is the per unit contribution so it will be computed as follows -

`contribution\:margin\:=(\:selling\:price-variable\:cost)/(total\:unit\:sales)`

`contribution\:margin\:=(\:1,035,000-\left ( 421,000+29,000 \right ))/(225,000)`

$2.6