Keith Corp.has sales of $200,000,a contribution margin ratio of 35%,and a profit of $40,000.If 10,000 units were sold,what is the variable cost per unit?
A)$13.00
B)$20.00
C)$7.00
D)$3.00

Question

Quizplus · Accepted Answer

The variable cost per unit can be calculated by first determining the total contribution margin, which is 35% of sales ($200,000), equaling $70,000. Since profit is $40,000, total fixed costs are sales minus contribution margin minus profit, which equals $90,000 ($200,000 - $70,000 - $40,000). The total variable cost is then sales minus contribution margin ($200,000 - $70,000 = $130,000). Dividing the total variable cost by the number of units sold (10,000) gives the variable cost per unit of $13.00.