Licard Wineries Inc. sold 700 bottles of vintage burgundy in April at a price of $120 each. Licard incurs $45 in variable costs for each bottle of vintage burgundy and has total monthly fixed costs of $50,000. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

Profit represents contribution margin exceeding fixed costs. Contribution margin is equal to the selling price per unit of $120 less variable costs per unit of $45, equaling $75 per bottle. Since 700 bottles were sold in April, total contribution margin in dollars equals $75 F1F1F1S1?F1F1F10 700 = $52,500. Fixed costs for the month are $50,000. Total contribution margin in dollars of $52,500 less monthly fixed costs of $50,000 results in profit for the month of $2,500.