Mega Corporation's relevant range of activity is 15,000 units to 20,000 units. When it produces and sells 15,000 units, its average costs per unit are as follo Average Cost per Unit $5.90 $4.50 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense $1.95 $10.00 OD. $26 20 $4.55 $1.90 $0.70 $0.75 If the selling price is $40.00 per unit, the contribution margin per unit sold is closest to: OA $13.95 OB. $6.50 OC($0 25)

FINANCIAL ACCOUNTING
10th Edition
ISBN:9781259964947
Author:Libby
Publisher:Libby
Chapter1: Financial Statements And Business Decisions
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Mega Corporation's relevant range of activity is 15,000 units to 20,000 units. When it produces and sells 15,000 units, its average costs per unit are as follows:
Average Cost
per Unit
$5.90
$4.50
Direct materials
Direct labor
Variable manufacturing overhead
Fixed manufacturing overhead
Fixed selling expense
Fixed administrative expense
Sales commissions
Variable administrative expense
$1.95
$10.00
O D. $26.20
$4.55
$1,90
$ 0.70
$0.75
If the selling price is $40.00 per unit, the contribution margin per unit sold is closest to:
OA$13.95
OB. $6.50
OC. (3025)
Transcribed Image Text:Mega Corporation's relevant range of activity is 15,000 units to 20,000 units. When it produces and sells 15,000 units, its average costs per unit are as follows: Average Cost per Unit $5.90 $4.50 Direct materials Direct labor Variable manufacturing overhead Fixed manufacturing overhead Fixed selling expense Fixed administrative expense Sales commissions Variable administrative expense $1.95 $10.00 O D. $26.20 $4.55 $1,90 $ 0.70 $0.75 If the selling price is $40.00 per unit, the contribution margin per unit sold is closest to: OA$13.95 OB. $6.50 OC. (3025)
Expert Solution
Step 1: Contribution Margin

The Excess of Sales Revenue over Variable Expenses is known as contribution Margin:

The formula to Compute the Contribution Margin is: 

Contribution Margin = Sales Revenue - Variable Expenses

or

Contribution Margin = Net Income(loss) + Fixed Expenses

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