Sparran Craft had sales of $2.24 million last year for which the total cost was $2 million. If the firm had fixed costs of $600,000 on sales of 56,000 books, then what is the firm's per-unit contribution? (Round the final answer to the nearest whole dollar.)
A) $20.00
B) $19.00
C) $15.00
D) $10.00

Question

Quizplus · Accepted Answer

The per-unit contribution is calculated by subtracting the variable cost per unit from the selling price per unit. First, we find the total contribution margin, which is sales minus total variable costs. Total sales were $2.24 million, and total costs were $2 million, of which $600,000 were fixed costs. Therefore, total variable costs were $2 million - $600,000 = $1.4 million. The contribution margin is $2.24 million - $1.4 million = $840,000. To find the per-unit contribution, divide the total contribution margin by the number of units sold: $840,000 / 56,000 books = $15 per book.

Sparran Craft Had Sales of $2