Question

Direct materials $ 5.50 direct labor $ 3.00 variable manufacturing overhead $ 1.50 fixed manufacturing overhead $ 4.00 fixed selling expense $ 2.50 fixed administrative expense $ 2.00 sales commissions $ 1.00 variable administrative expense $ 0.50 13. if the selling price is $21.50 per unit, what is the contribution margin per unit? (do not round intermediate calculations. round your answer to 2 decimal places.)

Answer 1

The contribution margin per unit is $ 1.50

The contribution margin is the percentage of a product's sales revenue that isn't consumed by variable costs and goes toward paying the firm's fixed expenses.

One of the main components of break-even analysis is the idea of contribution margin.

Labor-intensive businesses with few fixed expenses tend to have low contribution margins, whereas capital-intensive, industrial businesses have more fixed costs and, thus, higher contribution margins.

According to the question,

Total expenses per unit = $(5.50+3.00+1.50+4.00+2.50+2.00+1.00+0.50)

                                        = $ 20

Selling Price per unit = $ 21.50

Thus, contribution margin per unit = $ (21.50 - 20)

                                                         = $ 1.50

Learn more about contribution margin here:

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