Question

LMN Company produces a product that sells for $1. The company has production costs of $600,000, half of which are fixed costs. Assuming production and sales of 750,000 units, the contribution margin per unit is $ ____.

Answer 1

Answer:

Unitary Contribution margin= $0.6

Explanation:

Giving the following information:

LMN Company produces a product that sells for $1. The company has production costs of $600,000, half of which are fixed costs. Assuming the production and sales of 750,000 units.

Variable cost= 600,000/2= $300,000

Unitary variable cost= 300,000/750,000= $0.4

Unitary Contribution margin= 1 - 0.4= $0.6

Total contribution margin= $450,000

Answer 2

The unitary contribution margin is $0.6 when a company produces a product at $1 with production costs is $6,00,000.

What is a fixed cost?

Fixed costs refer to those costs of production that cannot be changed in the short run, it can only be changed in the long run only, this type of cost can not vary with the level of output. It is also known as direct or overhead costs. And is not dependent on the level of output produced.

Calculation of contribution margin:

Given,

The sales price of the product = $1,

Production costs = $6,00,000,

Sales  = 750,000 units.

According to the question, The variable cost will be:

$\text{Variable Costs}=\dfrac{\text{Production Cost}}{2} \\\\\\\text{Variable Costs}=\dfrac{\ 6,00000}{2}$

Then, unitary variable cost:

$\text{Unitary Variable Cost}=\dfrac{\text{Variable Cost}}{\text{Sales Units}}\\\\\\\text{Unitary Variable Cost}=\dfrac{\ 3,00,000}{7,50,000}\\\\\\\text{Unitary Variable Cost}=\ 0.4.$

Then, the Unitary contribution margin would be:

$=1-\ 0.4\\\\=\ 0.6$

Therefore, the total contribution margin would be:

$7,50,000\text{ Units}\times 0.6 = 4,50,000.$

Hence, the contribution margin per unit is $0.6.

Learn more about fixed costs, refer:

https://brainly.com/question/1494274