Gao Corp. produced 2,000,000 units this year, at a variable cost of $3 per unit. Its fixed costs are $1,200,000 per year. It sold all 2,000,000 units produced at $5 per unit. Its total contribution margin for the year was
A) Zero
B) 2400000
C) 2800000
D) 4000000

Question

Quizplus · Accepted Answer

Total variable cost = 2,000,000 x $3 = $6,000,000
Total contribution margin = Total revenue - Total variable cost
= 2,000,000 x $5 - $6,000,000
= $4,000,000

Therefore, the total contribution margin for the year was $4,000,000, which corresponds to choice letter D.

Gao Corp Produced 2,000,000 Units This Year, at a Variable Cost