Use the following information for the next 2 questions.
A manufacturer operating with excess capacity has been asked to fill a special order at $7.25 per unit. No other use of the currently idle capacity can be found. The manufacturer's usual variable costs per unit are $3.50 for direct materials, $1.50 for direct labor, $1.50 for variable overhead, and $0.50 for sales commission. No sales commission would be paid on this special order. The average overhead per unit is $0.25.
-The expected contribution margin per unit for the special order is
A) $0.00
B) $0.25
C) $0.75
D) $1.00

Question

Quizplus · Accepted Answer

Contribution margin = Selling price per unit - Variable cost per unit= $7.25 - ($3.50 + $1.50 + $1.50)= $7.25 - $6.50= $0.75

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