Question

Mauro Products distributes a single product, a woven basket. The selling price of each unit is $17 and the variable expense is $15 per unit. The company's monthly fixed expense is $4,800. What is the contribution margin per unit?

Answer 1

The contribution margin per unit for Mauro Products is calculated by subtracting the variable cost per unit from the selling price per unit, which is $2 per woven basket.

Step-by-step explanation:

Calculating Contribution Margin per Unit

The contribution margin per unit is calculated by subtracting the variable expense per unit from the selling price per unit. For Mauro Products, the selling price per unit is $17 and the variable expense per unit is $15. Therefore, the contribution margin per unit is:

Selling Price per Unit - Variable Expense per Unit = Contribution Margin per Unit

$17 - $15 = $2 per unit

This means that for each woven basket sold, Mauro Products earns a contribution margin of $2 that contributes towards covering the fixed expenses and generating profit.