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In a case study, a company sells a product for $50, with variable costs of $30 a

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Question: In a case study, a company sells a product for $50, with variable costs of $30 and fixed costs of $10, what is the contribution margin?

Options:

  1. $10
  2. $20
  3. $30
  4. $40

Correct Answer: $20

Solution: 

Contribution margin is calculated as selling price minus variable costs, which is $50 - $30 = $20.

In a case study, a company sells a product for $50, with variable costs of $30 a

Practice Questions

Q1
In a case study, a company sells a product for $50, with variable costs of $30 and fixed costs of $10, what is the contribution margin?
  1. $10
  2. $20
  3. $30
  4. $40

Questions & Step-by-Step Solutions

In a case study, a company sells a product for $50, with variable costs of $30 and fixed costs of $10, what is the contribution margin?
  • Step 1: Identify the selling price of the product, which is $50.
  • Step 2: Identify the variable costs associated with the product, which are $30.
  • Step 3: Use the formula for contribution margin: Contribution Margin = Selling Price - Variable Costs.
  • Step 4: Substitute the values into the formula: Contribution Margin = $50 - $30.
  • Step 5: Calculate the result: $50 - $30 = $20.
  • Step 6: The contribution margin is $20.
  • Contribution Margin – The contribution margin is the amount remaining from sales revenue after variable costs have been deducted, indicating how much is available to cover fixed costs and contribute to profit.
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