If a company sells 1,000 units at $20 each and has variable costs of $12 per uni

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Question: If a company sells 1,000 units at $20 each and has variable costs of $12 per unit, what is the contribution margin?

Options:

Correct Answer: $8,000

Solution:

Contribution margin = (Selling Price - Variable Cost) * Quantity = ($20 - $12) * 1,000 = $8,000.

If a company sells 1,000 units at $20 each and has variable costs of $12 per unit, what is the contribution margin?

If a company sells 1,000 units at $20 each and has variable costs of $12 per unit, what is the contribution margin?

Step 1: Identify the selling price per unit, which is $20.
Step 2: Identify the variable cost per unit, which is $12.
Step 3: Calculate the contribution margin per unit by subtracting the variable cost from the selling price: $20 - $12.
Step 4: The result from Step 3 is $8, which is the contribution margin per unit.
Step 5: Identify the total number of units sold, which is 1,000.
Step 6: Calculate the total contribution margin by multiplying the contribution margin per unit by the total number of units sold: $8 * 1,000.
Step 7: The result from Step 6 is $8,000, which is the total contribution margin.

Contribution Margin – The contribution margin is the difference between the selling price per unit and the variable cost per unit, multiplied by the number of units sold.