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29 July, 10:20

At its $34 selling price, Atlantic Company has sales of $17,000, variable manufacturing costs of $6,000, 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? Multiple Choice $16 $14 $18 $30

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Answers (2)
  1. 29 July, 14:18
    0
    Contribution margin per unit is $22

    Explanation:

    Atlantic company

    Income statement

    Sales $17,000

    Less Variable Manufacturing cost $6,000

    Contribution Margin $11,000

    Less Fixed Manufacturing cost $1,000

    Gross Profit = $10,000

    Less Variable selling & admin expense $2,000

    Less Fixed selling & admin expense $1,000

    Net profit $7,000

    Volume = sales divided by unit sales price

    = $17,000/34

    = 500 units

    Contribution Margin per unit = $11,000/500 units

    = $22
  2. 29 July, 14:20
    0
    The correct option is $18

    Explanation:

    Contribution margin calculation starts with selling price per unit, then deduct variable cost per unit, the resulting amount is the contribution margin per unit, which is the contribution towards fixed costs and eventual profit made by one unit of output.

    The computation of contribution margin per unit is found below:

    selling price $34

    variable cost per unit ($16)

    contribution margin per unit $18

    Variable cost per unit:

    Variable manufacturing costs $6,000

    variable selling and administrative costs $2,000

    total variable costs $8000

    Sales volume = sales/selling price = $17,000/$34=500

    variable cost per unit=total variable cost/volume=$8,000/500=$16
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