Question

Shannon purchases reams of copy paper for $1.75 and sells them for $4.25. Her business is all on the internet, so she works from home and has minimal business expenses. She pays shipping costs of $1.18 per ream. She has one other employee that she pays $1,200 per month plus a commission of 8% of sales revenue. What is Shannon’s unit contribution margin?

Answer 1

Answer:

The contribution margin per unit is 0.98$

Explanation:

$Sales \: Revenue - Variable \: Cost = Contribution \: Margin$

4.25 revenue

1.75 copo paper

1.18 shipping cost

.34 sales commision

3.27 total variable cost

Contribution 4.25 - 3.27 = 0.98

The contribution margin per unit is 0.98$ This is what is left after paying the variable cost.