Question

For Buffalo Co., at a sales level of 5,000 units, sales is $75,000, variable expenses total

$50,000, and fixed expenses are $21,000. What is the contribution margin per unit?
A) $4.20
B) $5.00
C) $10.00
D) $15.00

Answer 1

The contribution margin per unit for Buffalo Co., when selling 5,000 units, with sales of $75,000 and variable expenses of $50,000, is $5.00 per unit.

Step-by-step explanation:

To calculate the contribution margin per unit for Buffalo Co., we first need to understand that contribution margin is the difference between sales and variable expenses. With sales of $75,000 for 5,000 units, we have a sales revenue of $15 per unit. The variable expenses amount to $50,000 for 5,000 units, which gives us a variable cost of $10 per unit. The contribution margin per unit is therefore calculated as the difference between the sales revenue per unit and the variable cost per unit.

Sales revenue per unit = $75,000 ÷ 5,000 units = $15 per unit

Variable cost per unit = $50,000 ÷ 5,000 units = $10 per unit

Contribution margin per unit = Sales revenue per unit - Variable cost per unit = $15 - $10 = $5.00