A new product is expected to sell for $20. The company would manufacture up to 46,500 units at a variable cost of $8 per unit. Fixed costs would be $220,000. Variable selling and administration expenses would amount to $3. Determine the contribution margin per unit and contribution margin rate.

Question

Quizplus · Accepted Answer

Contribution margin per unit = Selling price per unit - Variable cost per unit= $20 - $8= $12Contribution margin rate = Contribution margin per unit / Selling price per unit= $12 / $20= 0.60 or 60%

A New Product Is Expected to Sell for $20