Anniston Gifts makes a product that sell for $40 per unit has and has a unit variable cost of $18.The contribution margin ratio is 55%.Annual fixed costs are $11,990.The company expects to sell 2,000 units this year.By how much would profits increase if 140 more units are sold than expected?

Question

Quizplus · Accepted Answer

The contribution margin ratio is 55%, which means for each dollar of sales, 55% contributes to covering fixed costs and profit. The selling price is $40, so the contribution margin per unit is $40 * 55% = $22. Selling 140 more units would increase profits by 140 units * $22 contribution margin per unit = $3,080.

Anniston Gifts Makes a Product That Sell for $40 Per