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Question

Macy Corporation's relevant range of activity is 6,300 units to 13,500 units. When it produces and sells 9,900

units, its average costs per unit are as follows:


Average Cost per Unit

Direct materials $ 5.20

Direct labor $ 3.65

Variable manufacturing overhead $ 1.65

Fixed manufacturing overhead $ 2.90

Fixed selling expense $ 0.95

Fixed administrative expense $ 0.65

Sales commissions $ 0.90

Variable administrative expense $ 0.55


If the selling price is $29.00 per unit, the contribution margin per unit sold is closest to:

a) $10.50 b) $6.70 c) $20.15 d) $17.05


Please explain the correct answer.

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