Contribution Margin
Willie Company sells 25,000 units at $26 per unit. Variable costs are $18.20 per unit, and fixed costs are $66,300.
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 | $ |
Part 2
The manufacturing costs of Ackerman Industries for the first three months of the year follow:
Total Costs | Units Produced | |||
January | $400,350 | 4,090 | units | |
February | 340,560 | 1,935 | ||
March | 529,760 | 6,235 |
Using the high-low method, determine (a) the variable cost per unit and (b) the total fixed cost. Round all answers to the nearest whole dollar.
a. Variable cost per unit | $ |
b. Total fixed cost | $ |
Answers:
Part I:
a) Contribution margin ratio = (Contribution / sales )*100
Contribution = Sales - Variable cost
= $26 - $18.20
Contribution per unit = $7.80
Contribution margin ratio = ($7.80 / $26 )* 100
Contribution margin ratio = 30%
b) Unit contribution margin = Sales - Variable cost
= $26 - $18.20
Unit contribution margin = $7.80 or $8
c) Sales (25000 * $26 per unit ) = $650,000
Less : Variable cost (25,000 * 18.50) = 462,500
Contribution = $187,500
Less : Fixed cost = $ 66,300
Income from operation = $121,200
Part II :
Contribution Margin Willie Company sells 25,000 units at $26 per unit. Variable costs are $18.20 per...
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