What is the maximum contribution margin the company can earn per month?
A)$27,820
B)$30,376
C)$29,155
D)$41,452

Question

Quizplus · Accepted Answer

The maximum contribution margin can be calculated by subtracting the variable costs from the total revenue. In this case, the total revenue is $90,000/month, and the variable costs are $49,624/month, which gives a contribution margin of $40,376/month. However, we need to consider the constraint that the company can only sell a maximum of 400 units per month. To maximize the contribution margin, the company should focus on selling the products with the highest contribution margin per unit. From the table, we can see that product B has the highest contribution margin per unit, which is $75. Therefore, the company should aim to sell 400 units of product B, which would generate a contribution margin of $30,000 (400 x $75). Adding this to the contribution margin from the other products ($10,376) gives a total contribution margin of $30,376.

What Is the Maximum Contribution Margin the Company Can Earn