Question

If the sales price per unit were to increase by 10%, variable expenses were to increase by 12.5%, and fixed expenses were to increase by 20%, what would be the new contribution margin per unit

Answer 1

Incomplete question. Missing part read;

Hart Company sold 5,000 units for a price of $50 per unit and had the following information:

• Variable expenses: $160,000
• Fixed expenses: $125,000
• Breakeven sales point: $347,222

Answer:

$19

Explanation:

Using the contribution margin per unit represented as dollar value formula:

Unit Contribution Margin (CM)= Revenues per Unit -  minus the  Variable Expenses per Unit

where,

• sales price per unit increase of 10%= $50+10% ($\frac{10}{100}$*50+$50) =$55.

• variable expenses increase by 12.5%= $160,000/5000= $32; $32+12.5% ($\frac{12.5}{100}$*32+$32)= $36.

CM = $55-$36= $19.