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31 December, 01:06

Milne Technology sells 15,000 units each quarter. Its current selling price is $25 per unit and the contribution margin ratio is 0.6. Next quarter the price will increase to $28 per unit, and Milne will keep the same contribution margin ratio. How will the variable cost per unit next quarter change as a result?

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  1. 31 December, 01:36
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    Contribution=Selling Price*Contribution Ratio

    =25*.06

    =$15

    Variable Expense=Sales-Contribution

    =25-15

    $10

    When Selling price=$28

    Contribution=$28*.06

    =$16.8

    Variable Expense=28-16.8

    =$11.2

    Increase in variable=11.2-10

    =$1.2
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