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SECTION C 1. a, With typical examples explain the meaning of contribution Margin (1 marks)...

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Accounting

SECTION C
1. a, With typical examples explain the meaning
of contribution Margin (1 marks)
b, Assume that the Pants Shop can purchase
pants for $32 from a local factory; other variable costs
amount
to $10 per unit. The local factory allows the Pants shop to return all unsold
pants and receive a
full $32 refund per pair of pants within one
year. The average selling price per pair of pants is $70 and
total
fixed costs amount to $84,000 (6
marks)
Required:
i,
How much revenue will the business receive if 2,500 units are sold?
ii,
How much variable costs will the business incur?
iii,
What is the contribution margin per unit?
iv,
What is the total contribution margin when 2,500 pairs of pants are sold?
v,
What is the contribution margin percentage?
vi,
If the business sells 3,000 pairs of pants, revenues and contribution margin
will be?

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