Question

A company sold 20,000 units of its product for $20 each. Variable cost per unit is $11. Fixed expenses total $150,000. The company's contribution margin is ______.

Answer 1

$180,000

Contribution margin = 20,000 x ($20-$11) = $180,000

What is marginal cost ?

The difference in total production costs caused by creating or manufacturing one more unit is known as the marginal cost in economics. Divide the variation in production costs by the variation in quantity to determine marginal cost. Finding the point at which an organization may realize economies of scale to improve production and overall operations is the goal of marginal cost analysis. The producer may make money if the marginal cost of manufacturing one more unit is less than the price per unit.

In management accounting, the idea of marginal cost is crucial because it may be used to maximize output through economies of scale within an organization.

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