In Rachel’s t-shirt shop, what is her fixed cost contribution per unit if she sells t-shirts for $20 and buys them for $10 with a monthly rent of $100?

To determine Rachel's fixed cost contribution per unit, we first need to clarify what is meant by "fixed cost contribution." Fixed costs are expenses that do not change with the volume of goods produced or sold, such as rent. In this scenario, Rachel has a fixed cost of $100 for monthly rent.

Next, we should calculate the contribution margin per unit from selling the t-shirts. Rachel sells each t-shirt for $20 and buys them for $10. The contribution margin per t-shirt is calculated as:

Selling Price - Cost Price = Contribution Margin

$20 - $10 = $10

This means that for every t-shirt she sells, she contributes $10 towards covering her fixed costs. Since fixed costs remain constant regardless of the number of t-shirts sold, we can conclude that each t-shirt contributes $10 towards her fixed costs after subtracting the variable cost (the cost of the t-shirt itself).

The fixed cost contribution per unit is, therefore, $10. This is why the correct answer is the option that indicates $10 as the fixed cost contribution per unit. The distinction between fixed costs and variable costs helps understand how much each unit contributes to the overall fixed expenditures of the business.