A company with monthly fixed costs of $170,000 expects to earn monthly operating income of $25,000 by selling 6,500 units per month.What is the company's expected unit contribution margin?
A)$30 per unit
B)$26 per unit
C)$22 per unit
D)The information given is insufficient to determine unit contribution margin.

Question

Quizplus · Accepted Answer

The unit contribution margin can be calculated by first determining the total contribution margin, which is the difference between total sales and total variable costs. Since operating income is given as $25,000 and fixed costs are $170,000, the total contribution margin is $25,000 + $170,000 = $195,000. Dividing this by the number of units (6,500) gives a unit contribution margin of $30 ($195,000 / 6,500 units).

A Company with Monthly Fixed Costs of $170,000 Expects to Earn