Question

At its $34 selling price, Atlantic Company has sales of $17,000, variable manufacturing costs of $6,000, fixed manufacturing costs of $1,000, variable selling and administrative costs of $2,000 and fixed selling and administrative costs of $1,000. What is the company's contribution margin per unit? Multiple Choice $16 $14 $18 $30

Answer 1

Contribution margin per unit is $22

Step-by-step explanation:

Atlantic company

Income statement

Sales $17,000

Less Variable Manufacturing cost $6,000

Contribution Margin $11,000

Less Fixed Manufacturing cost $1,000

Gross Profit = $10,000

Less Variable selling & admin expense $2,000

Less Fixed selling & admin expense $1,000

Net profit $7,000

Volume = sales divided by unit sales price

= $17,000/34

= 500 units

Contribution Margin per unit = $11,000/500 units

= $22

Answer 2

The correct option is $18

Step-by-step explanation:

Contribution margin calculation starts with selling price per unit,then deduct variable cost per unit ,the resulting amount is the contribution margin per unit,which is the contribution towards fixed costs and eventual profit made by one unit of output.

The computation of contribution margin per unit is found below:

selling price $34

variable cost per unit ($16)

contribution margin per unit $18

Variable cost per unit:

Variable manufacturing costs $6,000

variable selling and administrative costs $2,000

total variable costs $8000

Sales volume =sales/selling price =$17,000/$34=500

variable cost per unit=total variable cost/volume=$8,000/500=$16