Question

For sunland company at a sales level of 4000 units, sales is $85000, variable expenses total $66000, and fixed expenses are $21000. what is the contribution margin per unit?

Answer 1

$4.75 is the contribution margin per unit.

Contribution margin per unit= Contribution÷Sales units

= ($85,000-$66,000)÷4,000

= $4.75 per unit.

The contribution margin per unit is the selling price of a unit of merchandise minus the variable manufacturing costs of that unit. The contribution margin per unit is the amount that each sale contributes to paying fixed costs.

Contribution Margin is calculated as Revenue – Variable Cost. The contribution margin ratio is calculated as (sales – variable costs) / sales.

A contribution margin of 100% is optimal, so the closer the contribution margin is to 100%, the better. The higher the number, the more the company can cover overhead costs with the available cash.

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