Question

Zeke Company sells 23,700 units at $18 per unit. Variable costs are $10 per unit, and fixed costs are $34,600. The contribution margin ratio (rounded to the nearest whole percent) and the unit contribution margin are a.44% and $8 per unit b.44% and $18 per unit c.1% and $10 per unit d.1% and $18 per unit

Answer 1

a.44% and $8 per unit

Step-by-step explanation:

The contribution margin ratio is the ratio of contribution margin to sales.

Contribution margin is the difference between sales and variable cost.

Furthermore, contribution margin per unit is the difference between sales per unit and variable cost per unit.

contribution per unit = $18 - $10

= $8

contribution margin ratio = $8/$18

=0.44

= 44%

Answer 2

a. The contribution margin ratio is 44% and unit contribution margin is $8. So a is the correct option

Step-by-step explanation:

The contribution margin ratio is the difference between a company's sales and variable cost that is expressed as apercentage of sales. The unit contribtuion margin is sales - variable cost (contribution margin) expressed in $ per unit.

The formula for Contribution margin (CM) ratio is:

CM ratio = (Selling Price - Variable cost) / Selling price

CM ratio = (18 - 10) / 18 = 0.4444 or 44.44% rounded off to 44%

The unit contribution margin = Selling price per unit - Variable cost per unit

Unit contribution margin = 18 - 10 = $8