Question

At its $60 selling price, Atlantic Company has sales of $15,000, variable manufacturing costs of $4,000, fixed manufacturing costs of $1,000, variable selling and administrative costs of $2,000 and fixed selling and administrative costs of $1,000. What is the company's contribution margin per unit?

A. $26

B. $36

C. $44

Answer 1

Answer: B) $36

Price b= $60

total sales = $15000

So, total no of units sold = $15000/$60 = 250

250 units are sold.

Variable costs = $4000+$2000 = $6000

[Variable manufacturing costs and variable selling/ administrative costs]

Per unit variable cost = $6000/250 = $24

Contribution margin part of the price per unit that is not consumed by variable costs and thus contributes to the recovery of fixed costs. This is the difference between per unit selling price and per unit variable cost.

Contribution margin= $60-$24 = $36

So, the answer is $36.