Question

The Cumberland Company provides the following information: Sales (250,000 units) $625,000 Manufacturing costs: Variable 212,500 Fixed 37,500 Selling and administrative costs: Variable 100,000 Fixed 25,000 What is the contribution margin per unit for Cumberland

Answer 1

$1.25

Step-by-step explanation:

Contribution margin per unit is computed as;

= Selling price per unit - Variable costs per unit

Selling price per unit = $625,000 ÷ 250,000 units = $2.50 per unit

Variable costs per unit = ($212,500 + $100,000) ÷ 250,000 units = $1.25 per unit.

Therefore,

Contribution margin per unit

= $2.50 - $1.25

= $1.25

The contribution margin per unit for Cumberland is $1.25