A café’s signature drink has a $6 selling price and $2.50 variable cost. Which statement is correct for contribution margin reasoning?

Question

BlackTom AI · Accepted Answer

Contribution margin equals selling price minus variable cost, so compute it directly: 6.00 − 2.50 = 3.50.

1) Relevant concepts
- Selling price (revenue per unit): $6.00.
- Variable cost (cost that changes with each unit sold): $2.50 per drink.
- Contribution margin (CM) per unit: revenue minus variable cost; the amount available to cover fixed costs and contribute to profit.
- Contribution margin ratio: CM divided by selling price, useful for percent-based analysis.

2) Step-by-step reasoning
- Step 1: Identify the numbers: price = $6.00, variable cost = $2.50.
- Step 2: Subtract variable cost from price to find per-unit contribution margin.
- Step 3: Interpret the result: the per-unit CM goes first to cover fixed costs; once fixed costs are covered, additional CM becomes profit.

3) Calculations (all intermediate steps)
- Contribution margin per unit = Selling price − Variable cost
- = $6.00 − $2.50
- = $3.50 per drink.
- Contribution margin ratio = $3.50 / $6.00 = 0.5833 = 58.33%.

4) Why the correct answer is correct
A contribution margin of $3.50 means each drink provides $3.50 to pay fixed costs (rent, salaried staff, equipment) and, after fixed costs are covered, to generate profit. The CM is the standard metric for this purpose in cost–volume–profit analysis.

5) Why the other options are incorrect
- "Contribution margin equals only labor cost": Incorrect — CM is not a single cost component; it is revenue minus all variable costs, not just labor.
- "Contribution margin is $2.50": Incorrect — $2.50 is the variable cost, not the CM.
- "Contribution margin matters only after expansion": Incorrect — CM is fundamental for pricing, break-even, and profit planning at any scale, not only after expansion.

6) Conclusion
The correct statement is: Contribution margin is $3.50 and helps cover fixed costs and profit, which matches the provided answer.

A café’s signature drink has a $6 selling price and $2.50 variable cost. Which statement is correct for contribution margin reasoning?单项选择题

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