Question

Contribution Margin

Harry Company sells 21,000 units at $50 per unit. Variable costs are $33.50 per unit, and fixed costs are $142,100.

Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.

a. Contribution margin ratio (Enter as a whole number.)		%
b. Unit contribution margin (Round to the nearest cent.)	$	per unit
c. Income from operations

Answer 1

Solution:
Units Sold	21000 units
Selling price per unit	$50
Variable cost	$33.50
Fixed Cost	$142,100
a)
Calculation of Contribution Margin and Ratio:
Sales	$1,050,000	(21000*$50)
Less:Variable cost	($703,500)	(21000*$33.50)
Contribution Margin	$346,500
Contribution Margin ratio = Contribution/Sales *100
	$346500/$1050000*100
	33	%
Contribution Margin Ratio = 33%
b)
Calculation of unit contribution margin:
	Per Unit
Sales	$50
Less:Variable cost	($33.50)
Contribution Margin	$17
Unit Contribution Margin =$17 Per unit
c)
Calculation of Income from Operations:
Contribution Margin	$346,500
Less:Fixed Cost	($142,100)
Income	$204,400
Income from Operations = $204400