Question

Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are

a. 47% and $11 per unit
b. 53% and $7 per unit
c. 47% and $8 per unit
d. 52% and $11 per unit

Answer 1

d. 52% and $11 per unit

Step-by-step explanation:

Units sold (n) = 25,000

Selling price (P) = $21

Sales Revenue (S) = $21 x 25,000 = $525,000

Variable costs per unit (VCu) = $10

Total Variable costs = $10 x 25,000 = $250,000

Fixed costs (FC) = $75,000

The contribution margin ratio (CMR) is defined as:

`CMR =(S- VC)/(S)\\CMR =(525,000- 250,000)/(525,000)\\CMR = 52\%`

The unit contribution margin (UCM) is the difference between the sales contribution per unit (P) and the variable cost per unit (VCu)

`UCM = P- VC_u\\UCM=21-10\\UCM=\$ 11`

Therefore, the answer is alternative d. 52% and $11 per unit