Question

Marissa creates fruit baskets to sell to a gift shop. Marissa charges the gift shop $12 for a medium-sized fruit basket. However, it only costs her $4.50 to purchase the fruit, basket, and other supplies. Marissa also has an assistant that she pays $1,400 per month, and Marissa's salary is $2,500 per month. What is Marissa's contribution margin per basket?

a. $9.50
b. $7.50
c. $4.50
d. $12.00

Answer 1

Marissa's contribution margin per medium-sized fruit basket is $7.50, which is her selling price of $12 minus the variable costs of $4.50 associated with making each basket.

Step-by-step explanation:

The contribution margin per basket that Marissa makes is the selling price minus the variable costs associated with making each basket. In this scenario, she sells the fruit baskets for $12 and the variable costs (cost of fruit, basket, and other supplies) amount to $4.50. Therefore, the contribution margin per basket would be:

$12 (selling price) - $4.50 (variable costs) = $7.50.

The fixed costs, such as the assistant's salary and Marissa's salary, are not included when calculating the contribution margin per unit because they don't change with the number of units produced.