Last month when Holiday Creations, Inc., sold 39,000 units, total sales were $293,000, total variable expenses...
Last month when Holiday Creations, Inc., sold 39,000 units, total sales were $293,000, total variable expenses were $210,960, and fixed expenses were $39,800.
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 $1,100? (Do not round intermediate calculations.)
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Homework Answers
(1)
Contribution margin ratio = (sales - variable costs)/sales
= ($293000 - $210960)/$293000
= 28%
(2)
Estimated change in net operating income = Change in sales x contribution margin ratio
= $1100 x 28%
= $308
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