Question

Kent Manufacturing produces a product that sells for $50.00 and has variable costs of $24.00 per unit. Fixed costs are $260,000. Kent can buy a new production machine that will increase fixed costs by $11,400 per year, but will decrease variable costs by $3.50 per unit. Compute the contribution margin per unit if the machine is purchased. $29.50. $26.00. $27.50. $22.50. $28.50.

Answer 1

$29.50

Step-by-step explanation:

The computation of the contribution margin per unit is shown below:

Contribution margin per unit = Selling price per unit - Variable cost per unit

where,

Selling price per unit is $50

And, the variable cost per unit = $24 - $3.5 = $20.5

Now put these values to the above formula

So, the value would equal to

= $50 - $20.5

= $29.50 per unit