Cost Management: A Strategic Emphasis 5th Edition by David Stout, Edward Blocher, Gary Cokins

Exercise 19

Doughton Bearings produces ball bearings for industrial equipment. In evaluating the financial data from the previous year, the accounting manager has determined that the company’s unit sales price is $25 per bearing and the unit variable cost is $18 per bearing. What is the unit contribution margin?

Step 1 of 2

Contribution Margin:

The contribution margin is the difference between the entire revenue and total variable cost. The contribution margin per unit is the difference between the selling price per unit and variable cost per unit. It is a pointer that shows the changes in operating financial gain with alteration in the number of units. The contribution margin per unit is calculated as follows