Javier is the business manager of his college. In his role, Javier makes a lot of business decisions. Javier is currently considering installing a vending machine in one of the dorms for soft drinks. The machine rents for $200 a month and the electrical use is minimal. Javier can buy soft drinks for $.25 each and plans on charging $.75 each from the vending machine. What is the contribution margin on the soft drinks?
A) $.50
B) $.25
C) $.75
D) $1.00

Question

Quizplus · Accepted Answer

The contribution margin is calculated by subtracting the variable costs from the selling price. Here, the cost of one soft drink is $.25, and the selling price is $.75. Therefore, the contribution margin per soft drink is $.75 - $.25 = $.50.

Javier Is the Business Manager of His College