Chapter 5, Problem 1MCQ

To determine

Contribution Margin per Unit (CMPU):

Contribution margin refers to the difference between the sales revenue of a unit and its variable cost per unit. It represents the amount not absorbed by the variable cost and will be utilized to cover fixed cost of the company.

To identify: The correct option.

Explanation of Solution

Option a, $50 is correct.

Given,
Selling price of the product is $150 per unit.
Variable cost is $100 per unit.
Fixed cost is $75,000

Formula to calculate contribution margin per unit,

$\text{Contribution margin per unit}=\text{Selling price per unit}-\text{Variable cost per unit}$

Substitute $150 in the value of selling price per unit and $100 in the value of variable cost per unit.

$\begin{array}{c}\text{Contribution margin per unit}=\text{\$150 per unit}-\text{\$100 per unit}\\ =\$50\text{ per unit}\end{array}$

Hence, the correct option is a.