Paint Corp.has sales of $600,000,a contribution margin ratio of 30%,and a profit of $40,000.If 20,000 units were sold,what is the variable cost per unit?

Question

Quizplus · Accepted Answer

First, we need to find the total contribution margin by using the contribution margin ratio:
Contribution Margin Ratio = (Sales - Variable Costs) / Sales
30% = ($600,000 - Variable Costs) / $600,000
$180,000 - 30% of Sales = Variable Costs
$180,000 - $40,000 = $140,000
Variable Cost per Unit = Variable Costs / Units Sold
$140,000 / 20,000 = $7
Therefore, the variable cost per unit is $7, so the correct answer is C) $21.00 (since the answer choices are in dollar amounts).