A company's flexible budget for 12,000 units of production showed sales, $48,000; variable costs, $18,000; and fixed costs, $16,000. The contribution margin expected if the company produces and sells 16,000 units is:
A) $48,000.
B) $64,000.
C) $40,000.
D) $24,000.
E) $18,000.
C) $40,000.
Explanation: Selling price per unit = $48,000/12,000 units = $4.00 per unit
Variable costs per unit = $18,000/12,000 = $1.50 per unit
Contribution margin per unit = $4.00 – $1.50 = $2.50 per unit
Expected contribution margin for 16,000 units = $2.50 per unit × 16,000 units = $40,000.
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