The Selling Price of a Unit Is $20 and the Variable

question 96

Multiple Choice

The selling price of a unit is $20 and the variable product cost per unit is $14. In addition, a sales commission of 5% is paid on each sale. If the variable cost per unit $\textbf{ excluding }$ sales commission increases by 1%, what will be the new contribution margin?

• A)$4.86
• B)$5.10
• C)$5.16
• D)$6.00

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Definitions:

Operating Cash Flow

The cash generated from the normal operations of a business, reflecting how much cash is produced by the business's core operations.

Depreciation Expense

The distribution of a physical asset's cost over its expected lifespan for tax and accounting reasons.

Net Working Capital

The gap between a firm's existing assets and its short-term obligations, showcasing its liquidity and ability to run efficiently in the near term.

Accounts Payable

The amount of money owed by a business to its suppliers or creditors for goods and services bought on credit.