Question

Whole Milk 1.75 x 159,000 units sold Low-Fat Milk 1.75 x 417,000 units sold Chocolate Milk 1.85 x 182,000 units sold BKW incurs the following costs to produce its dairy products: Glass Bottles $1.45 per quart Milking Machine $17,000 Utilities $5,300 Depreciation for the Building $12,000 Cocoa (for Chocolate Milk only) $0.12 per quart Sugar (for Chocolate Milk only) $0.08 per quart Capping and Finishing Process $18,400 plus $0.10 (labor) per quart Repairs and Maintenance $8,400 General and Administration Support $27,600 Quality Control and Inspection $19,000 Separation Process (for Low-Fat Milk only) $0.05 per quart Shipping and Delivery $7,900 Customer Service and Order Taking $9,400 . What is the contribution margin per unit for each of the product lines (Whole Milk, Low-Fat Milk and Chocolate Milk)?

Answer 1

	Contribution margin per unit = sale price per unit - variable cost per unit
		Whole milk	Low fat milk	Chocolate milk
	Sale price per unit	$1.75	$1.75	$1.85
	Less: Variable cost
	Bottle	($1.45)	($1.45)	($1.45)
	Cocoa			($0.12)
	Capping	($0.08)	($0.08)	($0.08)
	Labour	($0.10)	($0.10)	($0.10)
	Separation process	($0.05)	($0.05)	($0.05)
Ans	Contribution margin per unit	$0.07	$0.07	$0.05