Talk Time Cellular sells smart phones for $150.The unit variable cost per phone is $25 plus a selling commission of 10%.Fixed manufacturing costs total $5,600 per month, while fixed selling and administrative costs total $2,100.What is the contribution margin per phone?

Question

Quizplus · Accepted Answer

The contribution margin per phone is calculated by subtracting the variable costs from the selling price. The variable cost per phone is $25 plus a 10% selling commission on the $150 selling price, which equals $15. Therefore, the total variable cost per phone is $25 + $15 = $40. Subtracting this from the selling price of $150 gives a contribution margin of $150 - $40 = $110 per phone.

Talk Time Cellular Sells Smart Phones for $150