Question

Carver 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 :

a) $7
b) $17
c) $22
d) $16

Answer 1

c) $22

Step-by-step explanation:

Contribution margin per unit is how much a unit produced by a certain company is able to contribute to the payment of the fixed selling and administrative costs, comissions for sells to employees are also part of selling and administrative costs, so the only things that we have to withdraw from the selling price would be the manufacturing cost, which would be the variable cost: 40-18=22, so the contribution margin per unit would be $22 dollars.