The Woof Woof company sells organic dog food. If the company’s president is given a raise,...
The Woof Woof company sells organic dog food. If the company’s president is given a raise, what effect will it have on the product’s unit contribution margin? Will it increase, decrease or have no effect.
Homework Answers
It will have no effect on the product's unit contribution margin
Unit contribution margin = Unit Selling Price - Unit variable cost
Variable cost is the cost which varies directly with the number of units produced or sold. It mainly consist of Direct material cost, direct labor cost, variable overhead costs and variable selling costs
The salary of president is a fixed cost for the company and an increase in the same will lead a reduction in net income for the company but it will lead to no effect on contribution margin as it is not a part of variable cost of the company.
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