Question

Waleska Whiskey has fixed costs of $340,000 and expects to earn monthly operating income of $50,000 by selling 6,500 cases per month. What is Waleska Whiskey's expected unit contribution margin?

A. $60.
B. $56.
C. $4.
D. The information given is insufficient to determine unit contribution margin.

Answer 1

The unit contribution margin cannot be determined with the given information. The answer is option D.

Step-by-step explanation:

The unit contribution margin can be calculated by subtracting the fixed costs from the monthly operating income and then dividing by the number of cases sold per month.

In this case, the fixed costs are $340,000 and the monthly operating income is $50,000. The number of cases sold per month is 6,500.

Thus, the unit contribution margin can be calculated as follows:

Unit Contribution Margin = (Monthly Operating Income - Fixed Costs) / Number of Cases Sold

Unit Contribution Margin = ($50,000 - $340,000) / 6,500

Unit Contribution Margin = -$290,000 / 6,500

Unit Contribution Margin = -$44.62

Since the unit contribution margin cannot be negative, the correct answer is The information given is insufficient to determine the unit contribution margin.