Homework Answers
Selling price per unit = $20
Cost of goods sold per unit = $12
Variable selling expenses per unit = 8% of selling price
= 20 x 8%
= $1.6
Variable administrative expense per unit = 20 x 5%
= 20 x 5%
= $1
Variable cost per unit = Cost of goods sold per unit + Variable selling expenses per unit+ Variable administrative expense per unit
= 12+1.6+1
= $14.6
Contribution margin per unit = Selling price per unit- Variable cost per unit
= 20-14.6
= $5.4
Number of units sold = 1,500
Total contribution margin in year 2 = Number of units sold x Contribution margin per unit
= 1,500 x 5.4
= $8,100
City's contribution margin = $8,100
Kindly comment if you need further assistance. Thanks
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