Anthony Herrera recently fulfilled his long-time dream of
opening a gym that offers spinning exercise classes for $5.96 per
person. To differentiate his gym and better serve his clients,
Anthony provides a towel, a bottle of water, and an after-workout
protein shake to each person participating in a class, at a cost of
$2.01 per person. Anthony employs three part-time instructors and
pays them each $1,118 per month. He also pays himself a monthly
salary of $4,106. Anthony’s other monthly costs are $1,626 for
rent, $1,312 for depreciation on his 32 bikes, and $1,812 in
utilities and insurance.
(a) What is Anthony’s contribution margin per
unit? (Round answer to 2 decimal places, e.g.
52.75.)
Contribution margin | $Enter contribution margin in dollars per unit | per unit |
(b) What is Anthony’s contribution margin ratio?
(Round answer to 2 decimal places, e.g.
52.75.)
Contribution margin ratio | Enter contribution margin ratio in percentages | % |
(c) Prepare Anthony’s monthly contribution format
income statement. Assume that he teaches 5,399 clients.
(Round per unit values to 2 decimal places, e.g. 52.75
and all other answers to 0 decimal places, e.g.
5,275.)
Requirement (a):
Selling price per unit | $5.96 |
(Less): Variable cost per unit | ($2.01) |
Contribution Margin per unit | $3.95 |
Requirement (b):
Contribution margin ratio = [Contribution margin per unit ÷ Selling price per unit] x 100
= [$3.95/$5.96] x 100
= 66.28%
Requirement (c):
Income Statement | ||
Sales [5,399 x $5.96] | $32,178 | |
(Less): Variable costs [5,399 x $2.01] | ($10,852) | |
Contribution margin | $21,326 | |
(Less): Fixed costs: | ||
Salaries expense | $1,118 | |
Salary-self | $4,106 | |
Rent expense | $1,626 | |
Depreciation expense | $1,312 | |
Utilities expense | $1,812 | |
Total Fixed costs | ($9,974) | |
Net income | $11,352 |
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