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A company sells a product for $50 per unit. If the variable cost per unit is $30

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Question: A company sells a product for $50 per unit. If the variable cost per unit is $30, what is the contribution margin per unit?

Options:

  1. $20
  2. $30
  3. $50
  4. $10

Correct Answer: $20

Solution: 

Contribution margin per unit = Selling price - Variable cost = $50 - $30 = $20.

A company sells a product for $50 per unit. If the variable cost per unit is $30

Practice Questions

Q1
A company sells a product for $50 per unit. If the variable cost per unit is $30, what is the contribution margin per unit?
  1. $20
  2. $30
  3. $50
  4. $10

Questions & Step-by-Step Solutions

A company sells a product for $50 per unit. If the variable cost per unit is $30, what is the contribution margin per unit?
  • Step 1: Identify the selling price of the product, which is $50.
  • Step 2: Identify the variable cost per unit, which is $30.
  • Step 3: Use the formula for contribution margin per unit: Contribution margin = Selling price - Variable cost.
  • 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 per unit is $20.
  • Contribution Margin – The contribution margin per unit is the amount remaining from sales revenue after variable costs have been deducted, indicating how much each unit contributes to covering fixed costs and generating profit.
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