Question

Steadigen Company sells two generators—Model A and Model B—for $448 per unit and $412 per unit, respectively. The variable cost of Model A is $408 per unit and of Model B is $304 per unit. If Steadigen Company's sales incentives reward sales of the goods with the highest contribution margin per unit, the sales force will be motivated to push sales of Model A more aggressively than Model B. O True O False

Answer 1

Answer: False

Contribution margin per unit:

	Model A	Model B
Selling price per unit	$       448	$       412
Less: variable cost per unit	$       408	$       304
Contribution margin per unit	$         40	$       108

From above table, We can see higher contribution margin per unit is of Model B i.e $ 108

Steadigen company sales incentive reward sales of the goods with the highest contribution marginper unit, then sales force will be motivated to push sales of Model B more agrressively than Model A becauase Model B has higher contribution margin per unit as compare to Model A.