Carver Corporation produces a product which sells for $40. Variable manufacturing costs are $18 per unit. Fixed manufacturing costs are $5 per unit based on the current level of sales volume, and fixed selling and administrative costs are $4 per unit. A selling commission of 15% of the selling price is paid on each unit sold. The contribution margin per unit is:

Question

Quizplus · Accepted Answer

The contribution margin per unit is calculated by subtracting all variable costs from the selling price. Here, the variable costs include the variable manufacturing costs ($18), the selling commission (15% of $40 = $6), and there are no variable fixed costs mentioned. So, the total variable cost per unit is $18 + $6 = $24. Subtracting this from the selling price ($40 - $24) gives a contribution margin of $16 per unit. Fixed costs per unit are not subtracted when calculating the contribution margin per unit.

Carver Corporation Produces a Product Which Sells for $40