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If a product sells for $100 and has variable costs of $60, what is the contribut

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Question: If a product sells for $100 and has variable costs of $60, what is the contribution margin?

Options:

  1. $40
  2. $60
  3. $100
  4. $20

Correct Answer: $40

Solution: 

Contribution margin = Sales ($100) - Variable Costs ($60) = $40.

If a product sells for $100 and has variable costs of $60, what is the contribut

Practice Questions

Q1
If a product sells for $100 and has variable costs of $60, what is the contribution margin?
  1. $40
  2. $60
  3. $100
  4. $20

Questions & Step-by-Step Solutions

If a product sells for $100 and has variable costs of $60, what is the contribution margin?
  • Step 1: Identify the selling price of the product. In this case, it is $100.
  • Step 2: Identify the variable costs associated with the product. Here, the variable costs are $60.
  • Step 3: Use the formula for contribution margin, which is: Contribution Margin = Sales - Variable Costs.
  • 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 is $40.
  • Contribution Margin – The contribution margin is the difference between sales revenue and variable costs, indicating how much revenue is available to cover fixed costs and contribute to profit.
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