Question

Marshall Company's GWhiz calculator sells for $40. Variable costs per unit are estimated to be $26. What are the contribution margin per unit and the contribution margin ratio?

A. Contribution margin per unit is $14; contribution margin ratio is 35%.
B. Contribution margin per unit is $26; contribution margin ratio is 65%.
C. Contribution margin per unit is $40; contribution margin ratio is 100%.
D. Contribution margin per unit is $16; contribution margin ratio is 40%.

Answer 1

The contribution margin per unit is $14 and the contribution margin ratio is 35%.

Step-by-step explanation:

To find the contribution margin per unit, we subtract the variable cost per unit from the selling price per unit. In this case, the selling price per unit is $40 and the variable cost per unit is $26, so the contribution margin per unit is $40 - $26 = $14.

To find the contribution margin ratio, we divide the contribution margin per unit by the selling price per unit and multiply by 100. In this case, the contribution margin per unit is $14 and the selling price per unit is $40, so the contribution margin ratio is ($14 / $40) * 100 = 35%.