Gabby Company sells a product for $ 100 per unit. Variable costs are $ 60 per unit, and fixed costs are $ 2 comma 500 per month. The company expects to sell 600 units in September. Calculate the contribution margin per unit, in total, and as a ratio.

(a) $40

(b) $24,000

(c) 40%

Explanation:

Given that,

Selling price = $100 per unit

Variable costs = $60 per unit

Fixed costs = $2,500 per month

Contribution margin per unit:

= Selling price - Variable costs

= $100 per unit - $60 per unit

= $40

Total Contribution margin:

= Contribution margin per unit * No. of units sold

= $40 * 600 units

= $24,000

Contribution margin ratio:

= (Selling price - Variable costs) : Selling price

= ($100 per unit - $60 per unit) : $100 per unit

= 0.4 or 40 %