Question

"At its $60 selling price, Atlantic Company has sales of $15,000, variable manufacturing costs of $4,000, 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?

Answer 1

The answer is $36

Step-by-step explanation:

Contribution margin per unit is calculated as product's sales price minus variable cost per unit.

Unit sales = total sales / selling price

$15,000/$60

=250 units

Unit variable cost = total variable cost/unit of production

Total variable cost = variable manufacturing costs + variable selling and administrative costs

$4,000 + $2,000

=$6,000/250 units

=$24

Therefore, the company's contribution margin per unit is

$60 - $24

=$36