Question

Question 3 --/1 View Policies Current Attempt in Progress Anthony Herrera recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes for $5.85 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 $1.78 per person. Anthony employs three part-time instructors and pays themeach $1.266 per month. He also pays himself a monthly salary of $4,078. Anthony's other monthly costs are $1.628 for rent, $1,302 for depreciation on his 34 bikes, and $1,826 in utilities and insurance. (a) What is Anthony's contribution margin per unit? (Round answer to 2 decimai places, eg. 52.75.) Contribution margin $ per unit (b) What is Anthony's contribution margin ratio? (Round answer to 2 decimal piaces, eg. 52.75.) Contribution margin ratio (c) Prepare Anthony's monthly contribution format income statement. Assume that he teaches 5,270 clients. (Round per unit values to 2 decimal places, e.g. 52.75 and all other answers to 0 decimal places, eg. 5,275.) Unit Sales Revenue 5.85 Varlable Expenses Contribution Margin 1.78 Contributlon Margin

Answer 1

a.

Selling price = $5.85 per person

Variable cost = $1.78 per person

Contribution margin per unit = Selling price - Variable cost

= 5.85-1.78

= $4.07

Contribution margin per unit

$4.07 per unit

b.

Contribution margin ratio = Contribution margin per unit / Selling price per unit

= 4.07/5.85

= 69.57%

Contribution margin ratio

69.57%

c.

Contribution Format Income Statement
Sales revenue		5,270 x 5.85 = 30,829.50	5.85
Variable expenses:
Tower/Water/Protein		-5,270 x 1.78 = -9,380.60	-1.78
Contribution Margin		$21,448.90	$4.07
Fixed expenses:
Instructor salary	1,266 x 3 =3,798
Owner's salary	4,078
Rent expenses	1,628
Depreciation	1,302
Utilities	1,826
Total Fixed expenses		12,632
Net Profit		$8,816.90

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