Calculate the contribution margin, if the variable cost per unit to produce a microwave is $39 and a contribution rate is 45%.
A) $17.55
B) $1.15
C) $70.91
D) $31.91
E) $39

Question

Quizplus · Accepted Answer

Contribution margin = Sales price per unit - Variable cost per unit
If contribution rate is 45%, it means that contribution margin is 45% of the sales price.
Let's say the sales price per unit is x.
Then, contribution margin = 0.45x
Variable cost per unit is given as $39.
So, 0.45x = x - $39
0.55x = $39
x = $39/0.55
x = $70.91 (sales price per unit)
Now, contribution margin per unit = $70.91 - $39 = $31.91. 
Therefore, the answer is D.

Calculate the Contribution Margin, If the Variable Cost Per Unit