Determining the contribution margin per unit Returning to Lambchops, and building on the answers to previous learning exercises in this chapter, we know that the sales price per processed bale of wool for Lambchops is $1000 and the variable costs per bale of wool amount to $650 per bale. Therefore, the contribution margin per unit is: Sales revenue per unit − variable cost per unit = $1000 − $650 = $350 per unit What this means is that for every extra bale of wool that is processed and sold by Lambchops, $350 should be added to the profits (or offset against losses).
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