Question

A firm expects to sell 26,000 units of its product at $12.00 per unit and to incur variable costs per unit of $7.00. Total fixed costs are $80,000. The total contribution margin is:________

Answer 1

Explanation:

Given that

Number of sales units = $26,000

Sale price = $12 per unit

Variable cost per unit = $7

Fixed cost = $80,000

So, the contribution margin per unit is

= Selling price per unit - variable cost per unit

= $12 - $7

= $5

And, the contribution margin in dollars is

= Number of sales unit × sale price - number of sales unit × sale price

= 26,000 units × $12 - $26,000 × $7

= $312,000 - $182,000

= $130,000