The Perfect Fit Company sells hand-sewn shirts at $58 per shirt. It incurs monthly fixed costs of...
Question:
The Perfect Fit Company sells hand-sewn shirts at $58 per shirt. It incurs monthly fixed costs of $8,000. The contribution margin ratio is calculated to be 30%.
What is the variable cost per shirt?
A. $75.40 per shirt
B. $17.40 per shirt
C. $58 per shirt
D. $40.60 per shirt
Contribution Margin:
The contribution margin is the surplus of selling price over the variable costs. A business will profit only if its contribution margin is more than the fixed costs.
Answer and Explanation: 1
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View this answerThe correct option is (D) $40.60 per shirt.
Given that -
- Selling Price = $58
- Contribution Margin ratio = 30%
We know that -
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Contribution Margin: Definition & Formula
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Chapter 22 / Lesson 20
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Understand what the contribution margin is. Learn the definition of contribution margin and understand its importance in business. Discover how to calculate it through examples.
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