Question

Holly's Hams, Inc. sells hams during the major holiday seasons. During the current year 10,000 hams were sold resulting in $355,000 of sales revenue, $55,000 of variable costs, and $24,000 of fixed costs. 6) Contribution margin per ham is: A) $5.00 B) $ 30.00 C) $20.00 D) None of these answers are correct. Answer: B Explanation: B) ($355,000 - $55,000) / 10,000 hams = $30 per ham

Answer 1

B) $ 30.00

Step-by-step explanation:

Contribution margin is the net of sales and variable cost. It he is net cost available to cover the fixed cost and make the profit after that.

Formula to calculate the contribution margin is as follow

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

Selling price per ham = 355,000 / 10,000 = $35.5 per ham

Variable cost per ham = $55,000 / 10,000 = $5.5 per ham

Contribution margin = price - variable cost = 35.5 - 5.5 = $30 per ham