A company with monthly fixed costs of $220,000 expects to earn monthly operating

Question

A company with monthly fixed costs of $220,000 expects to earn monthly operating income of $30,000 by selling 5,000 units per month. What is the company's expected unit contribution margin?

$50.

$44.

$6.

The information given is insufficient to determine unit contribution margin.

A company with monthly fixed costs of $220,000 expects to earn monthly operating income of $30,000 by selling 5,000 units per month. What is the company's expected unit contribution margin?

$50.

$44.

$6.

The information given is insufficient to determine unit contribution margin.

Explanation / Answer

contribution margin-Fixed costs=Target operating income

Hence  contribution margin=(220,000+30,000)=$250,000

Hence unit  contribution margin=($250,000/5000 units)

=$50(A)

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