Gabby Company sells a product for $ 100 per unit. Variable costs are $ 60 per unit, and fixed costs are $ 2 comma 500 per month. The company expects to sell 600 units in September. Calculate the contribution margin per unit, in total, and as a ratio.

(a) $40

(b) $24,000

(c) 40%

Explanation:

Given that,

Selling price = $100 per unit

Variable costs = $60 per unit

Fixed costs = $2,500 per month

Contribution margin per unit:

= Selling price - Variable costs

= $100 per unit - $60 per unit

= $40

Total Contribution margin:

= Contribution margin per unit × No. of units sold

= $40 × 600 units

= $24,000

Contribution margin ratio:

= (Selling price - Variable costs) ÷ Selling price

= ($100 per unit - $60 per unit) ÷ $100 per unit

= 0.4 or 40 %

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