Question

A jacket potato vendor charges $3.92 per potato sold. The variable cost of each potato served is $1.21. The stall has a fixed cost of $500 per week. What is the percentage decrease in unit contribution resulting from the drop in price to $3.00?

Answer 1

Answer:

% unit contribution margin= 33.95% drop

Explanation:

Giving the following information:

Selling price= $3.92

Unitary variable cost= $1.21

New selling price= $3

First, we need to calculate both unitary contribution margin:

Current contribution margin= 3.92 - 1.21= $2.71

New contribution margin= 3 - 1.21= $1.79

Now, the percentage change:

% unit contribution margin= [ 1- (1.79/2.71)]*100

% unit contribution margin= 33.95%