Question

Last month when Holiday Creations, Inc., sold 44,000 units, total sales were $299,000, total variable expenses were $215,280, and fixed expenses were $35,300.

Last month when Holiday Creations, Inc., sold 44,000 units, total sales were $299,000, total variable expenses were $215,280, and fixed expenses were $35,300. Required: 1. What is the company's contribution margin (CM) ratio? 2. What is the estimated change in the company's net operating income if it can increase total sales by $2,600? (Do not round intermediate calculations.) 28% 1. Contribution margin ratio 2. Estimated change in net operating income

Answer 1

Solution

Contribution margin ratio	28%
Estimated change in net operating income	$          728.00

Working

Sales revenue	$ 299,000.00
Variable cost	$ 215,280.00
Contribution margin	$    83,720.00
Contribution margin ratio (83720/299000)	28%
Estimated change in net operating income (2600 x 28%)	$          728.00