Raji custom-makes and sells dress shoes for $300 per pair. This past month, Raji sold 50 pairs of shoes. Raji knows his total cost for variable expenses was $5,000 for the month.What was Raji's contribution margin per pair of shoes made?a.) $60b.) $100c.) $350d.) $200
Q. Raji custom-makes and sells dress shoes for $300 per pair. This past month, Raji sold 50 pairs of shoes. Raji knows his total cost for variable expenses was $5,000 for the month.What was Raji's contribution margin per pair of shoes made?a.) $60b.) $100c.) $350d.) $200
Understand Contribution Margin: Understand what contribution margin per unit is.The contribution margin per unit is the selling price per unit minus the variable cost per unit. This tells us how much each unit contributes to covering fixed costs and generating profit.
Calculate Total Revenue: Calculate the total revenue from selling the shoes.Raji sold 50 pairs of shoes at $300 per pair. To find the total revenue, we multiply the number of pairs sold by the price per pair.Total Revenue = Number of Pairs Sold × Price per PairTotal Revenue = 50×$300Total Revenue = $15,000
Calculate Contribution Margin: Calculate the contribution margin for all pairs sold.To find the total contribution margin, we subtract the total variable costs from the total revenue.Total Contribution Margin = Total Revenue - Total Variable CostsTotal Contribution Margin = $15,000 - $5,000Total Contribution Margin = $10,000
Calculate Margin per Pair: Calculate the contribution margin per pair of shoes.To find the contribution margin per pair, we divide the total contribution margin by the number of pairs sold.Contribution Margin per Pair = Total Contribution Margin ÷ Number of Pairs SoldContribution Margin per Pair = $10,000÷50Contribution Margin per Pair = $200
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