A proposed 12-month project has fixed costs of $3,600,depreciation expense of $1,500,and a sales quantity of 1,300 units.What is the contribution margin if the projected level of sales is the accounting break-even point?
A)$3.92
B)$4.14
C)$4.50
D)$4.80
E)$5.00

Question

Quizplus · Accepted Answer

The contribution margin is the difference between the selling price per unit and the variable cost per unit. At the accounting break-even point, the total contribution margin equals the fixed costs. Therefore, the contribution margin per unit must be equal to the fixed costs divided by the sales quantity. In this case, the fixed costs are $3,600 and the sales quantity is 1,300 units. Therefore, the contribution margin per unit is $3,600 / 1,300 = $3.92.

A Proposed 12-Month Project Has Fixed Costs of $3,600,depreciation Expense