Question

Eley Corporation produces a single product. The cost of producing and selling a single unit of this product at the company's normal activity level of 40,000 units per month is as follows:

Direct materials	$	42.9
Direct labor	$	8.2
Variable manufacturing overhead	$	1.0
Fixed manufacturing overhead	$	27.1
Variable selling & administrative expense	$	1.5
Fixed selling & administrative expense	$	15.7

The normal selling price of the product is $103.9 per unit.
An order has been received from an overseas customer for 1,250 units to be delivered this month at a special discounted price. This order would not change the total amount of the company's fixed costs. The variable selling and administrative expense would be $0.9 less per unit on this order than on normal sales.
Direct labor is a variable cost in this company.

What is the contribution margin per unit on normal sales?

$50.30

$8.50

$9.50

$7.60

Answer 1

Contribution Margin = Sales price - Variable costs

= 103.90 - (42.9+8.2+1+1.5)

= 103.90 - 53.60

= 50.30

OPTION A IS THE ANSWER