Asked by Michael O’gilvie Jr on Jun 10, 2024
Verified
Bluegill Company sells 45,000 units at $18 per unit. Fixed costs are $62,000, and operating income is $298,000. Determine the (a) variable cost per unit, (b) unit contribution margin, and (c) contribution margin ratio.
Contribution Margin
The gap between a product's sales revenue and its variable expenses, which serves to offset fixed costs and produce earnings.
Variable Cost
Expenses that adjust in direct correlation with changes in production or sales levels.
Fixed Costs
Expenses that do not change with the level of production or sales activities within a certain range, such as rent, salary, insurance, and loan payments.
- Evaluate and comprehend fixed and variable costs in the scenario of production and sales processes.
- Calculate and interpret contribution margin and contribution margin ratio.
Verified Answer
b. $18 - $10 = $8 per unit
c. $8 ÷ $18 = 44.44%
Learning Objectives
- Evaluate and comprehend fixed and variable costs in the scenario of production and sales processes.
- Calculate and interpret contribution margin and contribution margin ratio.
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