Question

Rachel’s Candelabra Shoppe sells candles to clients for $6.00 each. The variable cost to produce each candle is $2.25 per candle. The fixed costs are $2,800 per month. What is the firm’s contribution margin per candle

Answer 1

The firm’s contribution margin per candle is $3.75

Step-by-step explanation:

The computation of the firm’s contribution margin per candle is shown below:

Contribution margin per unit = Selling price per unit - variable cost per unit

= $6 candle - $2,25 candle

= $3.75 candle

The fixed expense is used to compute the break-even sales in units and in dollars so for this calculation, the fixed expense should not be taken. Hence, ignored it