Heath Ltd owns and operates a textile manufacturing plant. Garments are sold for $40 each. The fixed plant and equipment costs are $51 600 per annum. Producing each garment incurs $15 of labour costs and $7.80 of material costs. Heath Ltd's contribution margin per garment is:

Question

Quizplus · Accepted Answer

The contribution margin per garment is calculated by subtracting the variable costs (labour and material costs) from the selling price. Here, the variable costs are $15 (labour) + $7.80 (material) = $22.80. Therefore, the contribution margin per garment is $40 (selling price) - $22.80 (variable costs) = $17.20.

Heath Ltd Owns and Operates a Textile Manufacturing Plant