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24 September, 10:32

Red Hawk Enterprises sells handmade clocks. Its variable cost per clock is $8, and each clock sells for $18. Calculate Red Hawk's unit contribution margin and contribution margin ratio. Suppose Red Hawk sells 2,000 clocks this year. Calculate the total contribution margin.

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  1. 24 September, 13:53
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    Instructions are listed below

    Explanation:

    Giving the following information:

    Its variable cost per clock is $8.

    Each clock sells for $18.

    Suppose Red Hawk sells 2,000 clocks this year.

    A) contribution margin = selling price - variable costs = 18-8 = $10

    B) Contribution margin rate = contribution margin / selling price = 10/18 = 0.5556

    C = Total contribution margin = units * contribution margin = 2000*10 = $20,000
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