Question

Contribution margin, cvp, net income, margin of safety

nail glow, inc., produces novelty nail polishes. each bottle sells for $5.90. variable unit costs are as follows:

acrylic base $0.86 bottle, packing material $1.15
pigments 0.57 selling commission 0.14
other ingredients 0.43

fixed overhead costs are $34,475 per year. fixed selling and administrative costs are $6,720 per year. nail glow sold 35,000 bottles last year.
What is the contribution margin per unit for a bottle of nail polish?

Answer 1

The contribution margin per unit for a bottle of nail polish sold by Nail Glow, Inc. is $2.75, which is calculated by subtracting the total variable costs per unit of $3.15 from the selling price of $5.90.

Step-by-step explanation:

To calculate the contribution margin per unit for a bottle of nail polish sold by Nail Glow, Inc., we subtract the total variable costs per unit from the selling price per unit. The sale price per unit is $5.90.

The variable costs sum up as follows: $0.86 for the acrylic base, $1.15 for the bottle, $0.57 for pigments, $0.14 for selling commission, and $0.43 for other ingredients, totaling $3.15. Therefore, the contribution margin per unit is $5.90 - $3.15 = $2.75.