Question

A project has expected sales of 63,000 units, ±4 percent; variable costs per unit of $84, ±5 percent; fixed costs of $287,000, ±1 percent; and a sales price per unit of $219, ±2 percent. The depreciation expense is $53,000 and the tax rate is 23 percent. What is the contribution margin per unit for a sensitivity analysis using a variable cost per unit of $85?

Answer 1

The contribution margin per unit is calculated by subtracting the variable cost per unit ($85) from the sales price per unit ($219), resulting in a contribution margin of $134 per unit.

Step-by-step explanation:

The contribution margin per unit is found by subtracting the variable cost per unit from the sales price per unit. Given that the sales price per unit is $219 and the variable cost per unit for the sensitivity analysis is chosen to be $85, the calculation for the contribution margin per unit is as follows:

Sales price per unit - Variable cost per unit = Contribution margin per unit
$219 - $85 = $134

Therefore, the contribution margin per unit would be $134.