Explain and show workSolutionProfit Contribution margin fi

Explain and show work

Solution

Profit = Contribution margin – fixed cost

        = Sales – variable cost – fixed cost

$ 130,000 = Sales per unit x no. of units – variable cost per unit x no. of units – fixed cost

$ 130,000 = $ 20 x 46,700 – variable cost per unit x 46,700 – $ 570,500

$ 130,000 = $ 20 x 46,700 – variable cost per unit x 46,700 – $ 570,500

$ 130,000 = $ 934,000 - variable cost per unit x 46,700 - $ 570,500

$ 130,000 = $ 363,500 - variable cost per unit x 46,700

Variable cost per unit x 46,700 = $ 363,500 - $ 130,000

Variable cost per unit x 46,700 = $ 233,500

Variable cost per unit = $ 233,500/46,700

                                       = $ 5

Affordable variable cost per unit is $ 5.