Asked by Jenna Raney on May 09, 2024
Verified
Goldfarb Company manufactures and sells toasters.Each toaster sells for $23.75 and the variable cost per unit is $16.25.Goldfarb's total fixed costs are $25,000,and budgeted sales are 8,000 units.What is the contribution margin per unit?
A) $7.50.
B) $16.25.
C) $23.75.
D) $60,000.
E) $1.25.
Variable Cost
Variable cost refers to expenses that fluctuate with the level of output or production activity, such as raw materials and direct labor costs.
Fixed Costs
Fixed costs are expenses that do not change with the level of production or sales activity, such as rent, salaries, or insurance, remaining constant regardless of business operations.
Contribution Margin
The difference between sales revenue and variable costs, showing how much sales contribute to covering fixed costs and generating profit.
- Specify the components and methodology for calculating the contribution margin and its ratio.
Verified Answer
Learning Objectives
- Specify the components and methodology for calculating the contribution margin and its ratio.
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