Question

Zahn company manufactures a product that sells for $120. a selling commission of 10% of the selling price is paid on each unit sold. variable manufacturing costs are $60 per unit. fixed manufacturing costs are $20 per unit based on the current level of activity, and fixed selling and administrative costs are $16 per unit. what is the contribution margin per unit?

Answer 1

The contribution margin is the difference between sales volume and variable costs.
 Or to put it another way: the contribution margin is the profits of a company, without considering the fixed costs.
 We have then:
 MC = $ 120 -60 $ = $ 60
 Answer:
 the contribution margin per unit is $ 60