CMA Intermediate · Management Accounting · Marginal Costing (Management Accounting)
Sunrise Foods Ltd sells a snack pack at ₹50 per unit. Variable cost per unit is ₹30 and total fixed costs are ₹2,00,000. If 12,000 units are sold, what is the contribution?
Contribution equals sales minus variable cost. Here it is ₹20 per unit (50 minus 30), so for 12,000 units it is ₹2,40,000. Fixed costs are not deducted when computing contribution; they are deducted from it to arrive at profit.
- A₹2,40,000Correct
- B₹4,00,000
- C₹1,00,000
- D₹6,00,000
Explanation
Contribution per unit = 50 - 30 = ₹20. Total contribution = 20 x 12,000 = ₹2,40,000. The figure ₹40,000 would be profit (after fixed costs), and ₹4,00,000 results from wrongly deducting only fixed costs from some base; fixed costs are not deducted in contribution.
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