Question

Zeke Company sells 25,000 units at $21 per unit. Variable costs are $10 per unit, and fixed costs are $75,000. The contribution margin ratio and the unit contribution margin are:A. 52% and $11 per unitB. 47% and $11 per unitC. 47% and $8 per unitD. 53% and $7 per unit

Answer 1

Answer:

A. 52% and $11 per unit

Explanation:

The contribution margin ratio is a measure of how much of a business revenue is available for covering its variable expenses. It also reveals how much is left to cover its fixed cost. The contribution margin is the unit income generated from each product sold. To calculate contribution margin ratio we divide contribution margin by sales. i.e

Contribution margin ratio = (contribution margin)/sales

Contribution margin = (sales - variable expenses)/sales

OR

contribution margin = (selling price - average variable cost)/ selling price

Since selling price is $21 and average variable cost is $10

contribution margin = (21 - 10)/21

= 11/21

=52.38% or 0.5238

Contribution margin = $21 - $10

= $11

thus,   A. 52% and $11 per unit is the answer.

variable cost per unit also means average variable cost.