If a company sells 500 units at a selling price of $15 each and incurs variable
Practice Questions
Q1
If a company sells 500 units at a selling price of $15 each and incurs variable costs of $6 per unit, what is the total contribution?
$4,500
$3,000
$7,500
$2,250
Questions & Step-by-Step Solutions
If a company sells 500 units at a selling price of $15 each and incurs variable costs of $6 per unit, what is the total contribution?
Step 1: Identify the selling price per unit, which is $15.
Step 2: Identify the variable cost per unit, which is $6.
Step 3: Calculate the contribution per unit by subtracting the variable cost from the selling price: $15 - $6.
Step 4: The contribution per unit is $9.
Step 5: Identify the total number of units sold, which is 500.
Step 6: Calculate the total contribution by multiplying the contribution per unit by the number of units sold: $9 * 500.
Step 7: The total contribution is $4,500.
Contribution Margin – The contribution margin is the difference between the selling price per unit and the variable cost per unit, which contributes to covering fixed costs and generating profit.
Total Contribution Calculation – Total contribution is calculated by multiplying the contribution margin by the number of units sold.
