{"id":201483,"date":"2025-03-15T13:08:11","date_gmt":"2025-03-15T13:08:11","guid":{"rendered":"https:\/\/learnexams.com\/blog\/?p=201483"},"modified":"2025-03-15T13:08:13","modified_gmt":"2025-03-15T13:08:13","slug":"wiser-group-sells-a-single-product-for-30-per-unit","status":"publish","type":"post","link":"https:\/\/www.learnexams.com\/blog\/2025\/03\/15\/wiser-group-sells-a-single-product-for-30-per-unit\/","title":{"rendered":"Wiser Group sells a single product for $30 per unit"},"content":{"rendered":"\n<p class=\"wp-block-paragraph\">Wiser Group sells a single product for $30 per unit.&nbsp; The variable costs for each unit are $7.50, while the total fixed costs are $4,500. If a 10% sales commission is introduced what is the new Contribution Margin Ratio:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">A) 72.5%.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">B) 65%.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">C) 75%<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">D) No Change<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><mark style=\"background-color:rgba(0, 0, 0, 0)\" class=\"has-inline-color has-ast-global-color-6-color\"><strong>The correct answer and explanation is :<\/strong><\/mark><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">To calculate the new Contribution Margin Ratio after introducing a 10% sales commission, we first need to understand how the sales commission affects the cost structure. The Contribution Margin (CM) ratio is defined as:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">[<br>\\text{Contribution Margin Ratio} = \\frac{\\text{Selling Price per Unit} &#8211; \\text{Variable Costs per Unit}}{\\text{Selling Price per Unit}}<br>]<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Step 1: Calculate the Original Contribution Margin (CM) Ratio without the sales commission.<\/strong><\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Selling Price per Unit = $30<\/li>\n\n\n\n<li>Variable Costs per Unit (before commission) = $7.50<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">[<br>\\text{CM} = 30 &#8211; 7.50 = 22.50<br>]<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">[<br>\\text{Contribution Margin Ratio (Original)} = \\frac{22.50}{30} = 0.75 \\text{ or } 75\\%<br>]<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">So, the original contribution margin ratio is 75%.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Step 2: Adjust for the new sales commission.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The introduction of a 10% sales commission affects the variable costs. The commission is 10% of the selling price, so the commission per unit is:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">[<br>\\text{Sales Commission per Unit} = 10\\% \\times 30 = 3<br>]<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Thus, the total variable cost per unit now becomes:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">[<br>\\text{New Variable Cost per Unit} = 7.50 + 3 = 10.50<br>]<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Step 3: Calculate the new Contribution Margin Ratio.<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The new contribution margin is now calculated as:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">[<br>\\text{New CM} = 30 &#8211; 10.50 = 19.50<br>]<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The new contribution margin ratio is:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">[<br>\\text{Contribution Margin Ratio (New)} = \\frac{19.50}{30} = 0.65 \\text{ or } 65\\%<br>]<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><strong>Conclusion:<\/strong><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The new contribution margin ratio, after accounting for the 10% sales commission, is <strong>65%<\/strong>.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The correct answer is <strong>B) 65%<\/strong>.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Explanation:<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">The addition of the 10% sales commission increases the variable costs per unit (from $7.50 to $10.50), which in turn decreases the contribution margin and, consequently, the contribution margin ratio. Initially, without the sales commission, the contribution margin ratio was 75%, but after the commission is introduced, it drops to 65%. Therefore, the new contribution margin ratio is lower, reflecting the increased costs due to the commission.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Wiser Group sells a single product for $30 per unit.&nbsp; The variable costs for each unit are $7.50, while the total fixed costs are $4,500. If a 10% sales commission is introduced what is the new Contribution Margin Ratio: A) 72.5%. B) 65%. C) 75% D) No Change The correct answer and explanation is : [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[25],"tags":[],"class_list":["post-201483","post","type-post","status-publish","format-standard","hentry","category-exams-certification"],"_links":{"self":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/201483","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/comments?post=201483"}],"version-history":[{"count":0,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/posts\/201483\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/media?parent=201483"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/categories?post=201483"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.learnexams.com\/blog\/wp-json\/wp\/v2\/tags?post=201483"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}