Chapter 5, Problem 11Q

To determine

Contribution Margin: Contribution Margin refers to the margin of profit expected by the company. The contribution margin is the difference between the selling price and the cost of the product.

Formula to compute the unit contribution margin:

$\text{Unit Contribution Margin}=\text{Sales Price}-\text{Per Unit Variable Cost}$

Formula to compute the contribution margin ratio:

$\text{Contribution Margin Ratio}=\frac{\text{Unit Contribution Margin}}{\text{Sales Price}}$

To compute: The unit contribution margin and the contribution margin ratio.

Given: Sales price is $40, Variable cost is $26 per unit, and Unit contribution margin is $14.