Question

MC Qu. 151 Kent Manufacturing produces a product... Kent Manufacturing produces a product that sells for $70.00 and has variable costs of $36.00 per unit Fixed costs are $408,000. Kent can buy a new production machine that will increase fixed costs by $28.800 per year but will decrease variable costs by $5.00 per unit Compute the contribution margin per unit if the machine is purchased . O O O O Prey 1 of 20 Next >

Answer 1

Answer-

Selling price = $70

Variable costs = Old variable cost – Decrease in variable costs

= $36 - $5.00

= $31

So, Contribution margin per unit

= Selling price – Variable costs

= $70 - $31

= $ 39 per unit