Question

The contribution margin per unit is $13 for a company with a sales price per unit of $45, variable cost of $32 per unit, and fixed costs of $4 per unit.

a. True
b. False

Answer 1

The statement that the contribution margin per unit is $13 is true, calculated by subtracting the variable cost per unit ($32) from the sales price per unit ($45). Fixed costs are irrelevant to this calculation.

Step-by-step explanation:

The student asks whether the contribution margin per unit is $13 given that the sales price per unit is $45, the variable cost is $32 per unit, and fixed costs are $4 per unit. This question involves a basic business calculation, specifically in the area of accounting or finance.

To answer the question, we calculate the contribution margin per unit by subtracting the variable cost per unit from the sales price per unit, which is $45 - $32 = $13. Since fixed costs per unit are not considered when calculating contribution margin per unit, the presence of the $4 per unit fixed cost is irrelevant to the contribution margin calculation.

Therefore, the statement that the contribution margin per unit is $13 is true. This demonstrates an understanding of how to calculate this important metric and its usefulness in determining pricing and production strategies.