Asked by Bryce Takeyama on Apr 27, 2024
Verified
Carver Corporation produces a product which sells for $40.Variable manufacturing costs are $18 per unit.Fixed manufacturing costs are $5 per unit based on the current level of activity, and fixed selling and administrative costs are $4 per unit.A selling commission of 15% of the selling price is paid on each unit sold.The contribution margin per unit is:
A) $7
B) $17
C) $22
D) $16
Variable Manufacturing Costs
Costs that vary directly with the level of production output, including raw materials and direct labor costs.
Fixed Manufacturing Costs
Costs that remain constant regardless of the level of production or sales volume, such as rent and salaries.
Selling Commission
A fee paid to a sales agent or an employee based on the value of sales generated.
- Investigate the consequences of price and cost fluctuations on the contribution margin and net operating income.
- Ascertain the contribution margin for each unit and its corresponding margin ratio.
Verified Answer
Unit CM = $40 per unit - $24 per unit = $16 per unit
Learning Objectives
- Investigate the consequences of price and cost fluctuations on the contribution margin and net operating income.
- Ascertain the contribution margin for each unit and its corresponding margin ratio.
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