Question

Lester Company has a single product. The selling price is $50 and the variable cost is $30 per unit. The company’s fixed expenses are $200,000 per month. What is the company’s unit contribution margin ratio?

a) 0.60
b) 0.40
c) 1.67
d) 20.00

Answer 1

The company's unit contribution margin ratio is calculated by taking the selling price minus the variable cost per unit and dividing it by the selling price, which gives a result of 0.40, corresponding to option b).

Step-by-step explanation:

The company's unit contribution margin ratio is calculated by subtracting the variable cost per unit from the selling price and then dividing by the selling price. Using the provided numbers, the formula is as follows:

The unit contribution margin ratio can be calculated by subtracting the variable cost per unit from the selling price per unit and then dividing that by the selling price per unit.

Unit Contribution Margin = Selling Price per Unit - Variable Cost per Unit = $50 - $30 = $20.

Unit Contribution Margin Ratio = Unit Contribution Margin / Selling Price per Unit = $20 / $50 = 0.40.

Therefore, the company's unit contribution margin ratio is 0.40, which corresponds to option b).