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A company produces a single product, and the associated data were as follows: number of units...

A company produces a single product, and the associated data were as follows: number of units sold 10,000; unit sale price 50 riyals; unit variable cost 25 riyals; and total fixed costs 200,000 riyals. Calculate the unit's contribution margin, total contribution margin and contribution margin ratio.
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Answer #1

Ans : Contribution Margin is the amount of Revenue available after providing for Variable cost to cover for fixed cost and contribute to Net profit.

a) Unit's Contribution Margin = Sellin price per unit - Variable Cost per unit

   = 50 riyals - 25 riyals

= 25 riyals

b) Total Contribution margin = Units sold * Unit's contribution margin

= 10,000 units * 25 riyals

= 250,000 riyals

c) Contribution Margin Ratio =(Unit's contribution margin / Selling price per unit) * 100

= (25 riyals / 50 riyals ) * 100

= 50%
  

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