Question

After XYZ Company sold 4,000 units, revenue was $480,000 variable costs were $120,000 and fixed costs were $150,000. How much would you expect the 4,001st unit sold would contribute to net operating income? You can assume 4,001 is within the relevant range.

Answer 1

When Company sold 4,000 units:
	Total	Per unit
units sold = 4000	(a)	(a) / 4,000 units
Revenue	$       4,80,000	$                      120
Variable cost	$       1,20,000	$                        30
Contribution margin	$       3,60,000	$                        90
Fixed Cost	$       1,50,000
Net Operating Income / (loss)	$       2,10,000
When Company sold very first 4,001 units:
	Per unit	Total
units sold = 4001	(b)	(b) X 4,001 units
Revenue	$                 120	$            4,80,120
Variable cost	$                   30	$            1,20,030
Contribution margin	$                   90	$            3,60,090
Fixed Cost		$            1,50,000
Net Operating Income / (loss)		$            2,10,090
Therefore, the very first 4,001 unit sold will contribute $90 ($210090 - $210000) which is equal to contribution margin per unit