Question

Monica has found that her contribution margin per hour of time for her highest selling product is $2,500. She wants to dedicate an extra 40 hours a month to this product, but she needs to know the increase in total contribution margin if she does this. The product generally sells for $100 a unit. What would be the increase in total contribution margin for this product

Answer 1

The correct answer is $100,000.

Step-by-step explanation:

According to the scenario, the given data are as follows:

Contribution margin = $2,500 per hour

Extra time = 40 hours

Selling price = $100 per unit

So, we can calculate the increase in contribution margin by using following formula:

Increase in contribution margin = Contribution margin × Extra time

By putting the value in the formula, we get

= $2,500 × 40

= $100,000