Zahn company manufactures a product that sells for $120. a selling commission of 10% of the selling price is paid on each unit sold. variable manufacturing costs are $60 per unit. fixed manufacturing costs are $20 per unit based on the current level of activity, and fixed selling and administrative costs are $16 per unit. what is the contribution margin per unit?

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Business

14 February, 05:42

Zahn company manufactures a product that sells for $120. a selling commission of 10% of the selling price is paid on each unit sold. variable manufacturing costs are $60 per unit. fixed manufacturing costs are $20 per unit based on the current level of activity, and fixed selling and administrative costs are $16 per unit. what is the contribution margin per unit?

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Alana Bradley · Answer 1

The contribution margin is the difference between sales volume and variable costs.

Or to put it another way: the contribution margin is the profits of a company, without considering the fixed costs.

We have then:

MC = $ 120 - 60 $ = $ 60

Answer:

the contribution margin per unit is $ 60