Relevant Costs – Short Answer

Practice Question

Intro to Managerial Accounting
Incremental Analysis
Relevant Costs and Revenues
Short Answer

A company is considering a special order of 1,000 units at $40 each. The variable costs for each unit are $25. What is the total contribution margin from this special order?

Answer +
Correct Answer: $15,000
Explanation +

Step 1: Identify key values – Selling Price = $40, Variable Cost = $25, Units = 1,000

Step 2: Contribution Margin per Unit = $40 - $25 = $15

Step 3: Total Contribution Margin = $15 × 1,000 = $15,000