Question

Lina Company produces a product which sells for $40. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit. The contribution margin per unit is:

Answer 1

Answer: $16

Step-by-step explanation:

Here's the complete question:

Carver company produces a product which sells for $40. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is paid on each unit sold. The contribution margin per unit is :

a) $7

b) $17

c) $22

d) $16

Firstly, we have to calculate the selling commission which will be:

= 15% × $40

= 0.15 × $40

= $6

Therefore, the contribution margin owe unit will be the difference between the sales and the variable cost. This will be:

= Sales - Variable costs

=$40 - ($18 + $6)

= $40 - $24

= $16

The contribution margin per unit is $16.