Asked by macie hutchinson on Jul 14, 2024
Verified
What is the firm's contribution margin?
A) $1800
B) $800
C) $1000
D) $300
Contribution Margin
The difference between sales revenue and variable costs, indicating how much revenue contributes to covering fixed costs.
Fixed Costs
Expenses that do not change in total regardless of the level of production or sales activity, such as rent, salaries, and insurance.
Marginal Costs
The additional cost incurred by producing one extra unit of a product or service.
- Ascertain the contribution margin and its influence on pricing and profit planning.
Verified Answer
SM
Samin MagarJul 20, 2024
Final Answer :
B
Explanation :
Contribution margin is calculated by subtracting variable costs (in this case, marginal cost of $1,000 per unit) from price per unit ($1,800 per unit).
Contribution margin = $1,800 - $1,000 = $800. Therefore, the answer is B) $800.
Contribution margin = $1,800 - $1,000 = $800. Therefore, the answer is B) $800.
Learning Objectives
- Ascertain the contribution margin and its influence on pricing and profit planning.