Gardner Manufacturing Company produces a product that sells for $120. A selling commission of 10% of the selling price is paid on each unit sold. Variable manufacturing costs are $60 per unit. Fixed manufacturing costs are $20 per unit based on the current level of activity, and fixed selling and administrative costs are $16 per unit. The contribution margin per unit is:
Contribution margin=unit selling price-unit variable costs.
To calculate the contribution margin per unit, we subtract the variable manufacturing costs, the selling commission, and the fixed selling and administrative costs from the selling price.
Variable manufacturing costs: $60
Selling commission: 10% of $120 = $12
Fixed selling and administrative costs: $16
Contribution margin per unit = Selling price - Variable manufacturing costs - Selling commission - Fixed selling and administrative costs
Contribution margin per unit = $120 - $60 - $12 - $16
Contribution margin per unit = $32
To calculate the contribution margin per unit, we need to subtract the variable costs per unit from the selling price per unit.
The variable costs per unit in this case are the variable manufacturing costs, which are given as $60 per unit.
So, the contribution margin per unit can be calculated as follows:
Selling price per unit - Variable costs per unit
Selling price per unit = $120
Variable costs per unit = $60
Contribution margin per unit = $120 - $60
Contribution margin per unit = $60
Therefore, the contribution margin per unit is $60.