Question

A firm expects to sell 25,200 units of its product at $11.20 per unit and to incur variable costs per unit of $6.20. Total fixed costs are $72,000. The total contribution margin is:

Answer 1

Answer:

The answer is $126,000

Explanation:

Contribution Margin is calculated as selling price minus the variable cost. It measures the ability of the sales price to cover the variable cost incurred on the goods produced.

Selling price per unit - $11.20

Variable cost per unit - $6.20

Contribution margin = $11.20 - $6.20

= $5

Total contribution margin is

$5 x 25,200 units

= $126,000