Our company sells a product for $150 per unit. Variable costs are $90 per unit and fixed costs are $18,000. The company expects to sell 800 units this year. What is the contribution margin in total dollars?Group of answer choices$60$18,000$30,000$48,000
Question
Our company sells a product for 90 per unit and fixed costs are 6030,000$48,000
Solution
The contribution margin per unit is calculated by subtracting the variable cost per unit from the selling price per unit. In this case, the selling price per unit is 90.
So, the contribution margin per unit = Selling price per unit - Variable cost per unit = 90 = $60
The total contribution margin is then calculated by multiplying the contribution margin per unit by the total number of units sold. The company expects to sell 800 units this year.
So, the total contribution margin = Contribution margin per unit * Total units sold = 48,000
Therefore, the contribution margin in total dollars is $48,000.
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