Question

Kent Manufacturing produces a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the contribution margin per unit if the machine is purchased.

Answer 1

$29.50

Step-by-step explanation:

Contribution margin = price - variable cost

Variable cost if machine is purchased = $24.00 - $3.50 = $20.50

= $50.00 - $20.50 = $29.50

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