Bill and Ted recently opened a plumbing business. The business currently has $500 monthly depreciation for its two trucks as its only fixed costs. During the first month, the company had 10 service calls each earning $99 revenue per call and variable costs amounting to $20 per call for plumbing supplies and gas. What is Bill and Ted's contribution margin for the first month

Question

Cara Ferguson

Business

26 June, 05:27

Bill and Ted recently opened a plumbing business. The business currently has $500 monthly depreciation for its two trucks as its only fixed costs. During the first month, the company had 10 service calls each earning $99 revenue per call and variable costs amounting to $20 per call for plumbing supplies and gas. What is Bill and Ted's contribution margin for the first month

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Giancarlo Sawyer · Answer 1

Bill and Ted's contribution margin for the first month is $790

Explanation:

Contribution margin per unit is the amount that each additional unit sold contributes towards a company's fixed costs and profit and calculated by following formula:

Contribution Margin per Unit = Sales Price - Variable Cost per Unit

The company had 10 service calls each earning $99 revenue per call and variable costs amounting to $20 per call

Contribution Margin per Unit = $99 - $20 = $79

Bill and Ted's contribution margin for the first month = $79 x 10 = $790