Jack's Toys Sells Kites for $20 Each

question 84

Multiple Choice

Jack's Toys sells kites for $20 each. Variable costs are $5 per kite. Fixed costs are $1800 per month. What is the contribution margin per kite?

• A)$1.33
• B)$0.75
• C)$5.00
• D)$15.00

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Definitions:

Fixed Cost

Operating expenses that do not change in proportion to the level of production or sales activity, such as rent or salaries.

Variable Costs

Expenses that fluctuate in proportion to the activity of a business.

Activity Level

A measure of the volume of production or operations, often influencing costs and revenues in a business.

Fixed Cost Per Unit

The total fixed costs divided by the number of units produced, indicating how much each unit needs to contribute to fixed costs.