Ans:
(a) Contribution margin ratio = (Sales - Variable Expenses)/Sales
Firstly we will calculate sales and variable expenses,
Sales = 27,000 × $46 per unit = $1,242,000
Variable expenses = 27,000 × $31.74 per unit = $856,980
Contribution margin ratio = [($1,242,000 - $856,980)/$1,242,000] × 100
Contribution margin ratio = 31%
(b) Unit contribution margin = Selling price per unit - Variable cost per unit
= $46 - $31.74
= $14.26 per unit
(c)
Sales |
$1,242,000 |
Less: Variable cost |
$856,980 |
Contribution margin |
$385,020 |
Less: Fixed cost |
$115,500 |
Income from operations |
$269,520 |
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