Bugle Corp.has sales of $400,000,a variable cost ratio of 40%,and a profit of $40,000.If 10,000 units were sold,what is the contribution margin per unit?
A)$60.00
B)$36.00
C)$24.00
D)$18.00

Question

Quizplus · Accepted Answer

Contribution Margin = Sales - Variable Costs
Profit = Sales - Variable Costs - Fixed Costs

Given:
Sales = $400,000
Variable Cost Ratio = 40% or 0.4
Profit = $40,000
Units Sold = 10,000

Using the profit equation,
$40,000 = $400,000 - 0.4($400,000) - Fixed Costs
$40,000 = $240,000 - Fixed Costs
Fixed Costs = $200,000

Using the contribution margin equation,
Contribution Margin = Sales - Variable Costs
Contribution Margin per unit = (Sales - Variable Costs) / Units Sold
Contribution Margin per unit = ($400,000 - 0.4($400,000)) / 10,000
Contribution Margin per unit = $240,000 / 10,000
Contribution Margin per unit = $24.00

Therefore, the correct choice is (C) $24.00.