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:

Question

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:

Answer 1

To find the contribution margin per unit, we need to calculate the total variable costs per unit and subtract them from the selling price.

First, let's calculate the total variable costs per unit:
Variable manufacturing costs per unit = $60
Selling commission per unit = 10% of selling price = 10% of $120 = $12
Total variable costs per unit = Variable manufacturing costs + Selling commission per unit
= $60 + $12 = $72

Next, let's calculate the fixed costs per unit:
Fixed manufacturing costs per unit = $20
Fixed selling and administrative costs per unit = $16
Total fixed costs per unit = Fixed manufacturing costs per unit + Fixed selling and administrative costs per unit
= $20 + $16 = $36

Now, we can calculate the contribution margin per unit:
Contribution margin per unit = Selling price - Total variable costs per unit - Total fixed costs per unit
= $120 - $72 - $36
= $120 - $108
= $12

Therefore, the contribution margin per unit for Gardner Manufacturing Company is $12.