Given a selling price of $5,000, a variable production cost of $1,500 per unit, and a variable selling expense of $500 per unit, what is the contribution margin per unit?

Multiple choice question for Capacity Analysis and Inventory Costing. Select an option, then review the explanation below.

Explanation

The contribution margin per unit is calculated by subtracting the total variable costs from the selling price. Here, variable costs per unit are $1,500 (manufacturing) + $500 (marketing) = $2,000. Therefore, contribution margin = $5,000 - $2,000 = $3,000.

Practice related questions from the same subject.

1.What term describes the operational capacity that is below the theoretical maximum capacity?
2.Under the Variable Costing approach, how are fixed manufacturing overhead costs handled during the accounting period?
3.What does the denominator represent in the fixed manufacturing cost rate calculation?
4.Which of the following is used to determine product capacity, cost analysis, performance assessment, and compliance with regulations?
5.In absorption costing, which format does the income statement typically use?

Given a selling price of $5,000, a variable production cost of $1,500 per unit, and a variable selling expense of $500 per unit, what is the contribution margin per unit?

Explanation

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