If a product sells for $100 and has a variable cost of $60, what is the contribu
Practice Questions
Q1
If a product sells for $100 and has a variable cost of $60, what is the contribution margin per unit?
$40
$60
$100
$20
Questions & Step-by-Step Solutions
If a product sells for $100 and has a variable cost of $60, what is the contribution margin per unit?
Step 1: Identify the selling price of the product, which is $100.
Step 2: Identify the variable cost of the product, which is $60.
Step 3: Use the formula for contribution margin, which is Contribution Margin = Selling Price - Variable Cost.
Step 4: Substitute the values into the formula: Contribution Margin = $100 - $60.
Step 5: Calculate the result: $100 - $60 = $40.
Step 6: The contribution margin per unit is $40.
Contribution Margin – The contribution margin is the difference between the selling price of a product and its variable costs, indicating how much revenue is available to cover fixed costs and contribute to profit.
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