Question

The following information relates to Clyde Corporation, which produced and sold 50,000 units during a recent accounting period. Revenue $850,000 Manufacturing Costs Fixed 210,000 Variable 140,000 Selling and administrative costs Fixed 300,000 Variable 45,000 Income Tax Rate 40% For the next accounting period, if production and sales are expected to be 40,000 units, the company should anticipate a contribution margin per unit of $1.86 $3.10 $7.30 $13.30

Answer 1

Answer:

option $13.30

Explanation:

Data provided in the question:

Units sold = 50,000

Revenue = $850,000

Fixed cost = $210,000

Variable cost = $140,000

Selling and administrative costs:

Fixed = $300,000

Variable = $45,000

Tax rate = 40%

Production and sales for the next accounting period = 40,000

Now,

Total Contribution margin = Revenue - Variable cost

= $850,000 - $140,000 - $45,000

= $665,000

Therefore,

For 40,000 units

Contribution margin per unit

= ( Total contribution margin ) ÷ (Number of units sold )

= $665,000 ÷ 50,000

= $13.30

Note : Contribution margin remains the same in per unit

Hence,

For 40,000 sales the Contribution margin per unit will be option $13.30