Use the following information to answer the next two questions:
A firm's fixed costs are $10 million.The firm charges $1800 for each unit and the firm's marginal costs are $1,000.
-What's the firm's contribution margin?
A)$1800
B)$800
C)$1000
D)$300

Question

Quizplus · Accepted Answer

Contribution margin is calculated as the difference between the selling price per unit and the variable cost per unit. In this case, the variable cost per unit is the marginal cost, which is $1000. Therefore, the contribution margin is $800 ($1800 - $1000).

The best choice, based on the limited information given, would be to calculate the breakeven point and compare it to the expected level of sales. If the expected level of sales is higher than the breakeven point, the firm would be profitable. If the expected level of sales is lower than the breakeven point, the firm would be operating at a loss.

Use the Following Information to Answer the Next Two Questions