Question

Gena Manufacturing Company has a fixed cost of $259,000 for the production of tubes. Estimated sales are 153,400 units. A before tax profit of $126,034 is desired by the controller. If the tubes sell for $22 each, what unit contribution margin is required to attain the profit target?

Answer 1

$2.51

Step-by-step explanation:

Gena Manufacturing Company calculation for contribution margin unit

Using this formula

Fixed cost + Tax profit/Estimated sales units

Let plug in the formula

Where:

Fixed cost =$259,000

Tax profit=$126,034

Estimated sales units=153,400

Hence:

(259,000 + 126,034) / 153,400

=$385,034/153,400

= $2.51

Therefore the contribution margin that is required to attain the profit target will be $2.51