If a product has a selling price of $100, variable costs of $60, and fixed costs
Practice Questions
Q1
If a product has a selling price of $100, variable costs of $60, and fixed costs of $20, what is the contribution per unit?
$40
$20
$60
$100
Questions & Step-by-Step Solutions
If a product has a selling price of $100, variable costs of $60, and fixed costs of $20, what is the contribution per unit?
Step 1: Identify the selling price of the product, which is $100.
Step 2: Identify the variable costs associated with the product, which are $60.
Step 3: Use the formula for contribution per unit: Contribution per unit = Selling Price - Variable Costs.
Step 4: Substitute the values into the formula: Contribution per unit = $100 - $60.
Step 5: Calculate the result: $100 - $60 = $40.
Step 6: The contribution 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.
