Rocky Mountain Bottling Company produces a soft drink that is sold for a dollar.At production and sales of 800,000 units,the company pays $600,000 in production costs,half of which are fixed costs.At that volume,general,selling,and administrative costs amount to $250,000,of which $70,000 are fixed costs.What is the amount of contribution margin per unit?
A) $0.40
B) $0.5375
C) $0.25
D) None of these is correct.

Question

Quizplus · Accepted Answer

The contribution margin per unit is calculated by subtracting variable costs per unit from the selling price per unit. The variable production cost per unit is $0.375 ($300,000 variable costs / 800,000 units), and the variable selling and administrative cost per unit is $0.225 ($180,000 variable costs / 800,000 units). The total variable cost per unit is $0.60. Therefore, the contribution margin per unit is $1.00 - $0.60 = $0.40.

Rocky Mountain Bottling Company Produces a Soft Drink That Is