A proposed project has fixed costs of $2,401.50, depreciation expense of $800, and a sales quantity of 950 units. What is the contribution margin if the projected level of sales is the accounting break-even point?
A) $3.37
B) $3.42
C) $3.45
D) $3.49
E) $3.52

Question

Quizplus · Accepted Answer

The contribution margin is the difference between the selling price per unit and the variable cost per unit. At the accounting break-even point, the total contribution margin equals the fixed costs. Therefore, the contribution margin per unit is equal to the fixed costs divided by the sales quantity. In this case, the contribution margin per unit is $2,401.50 / 950 = $3.37.

A Proposed Project Has Fixed Costs of $2,401