Question

Cullumber Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $100 throughout the country to loyal alumni of over 3,300 schools. Cullumber's variable costs are 40% of sales, fixed costs are $116,000 per month. (a1) * Your answer is incorrect. Calculate contribution margin ratio. (Round ratio to 2 percentage places, e.g. 0.38 - 38%)

Please find the following:

Contribution margin per unit

Contribution margin ratio

Fixed Cost

Fixed Cost per year

Breakecen Sales

Answer 1

Solution:

(a) Computation of Contribution Margin Ratio = 100 % - Variable cost as a % of Sales Contribution Margin Ratio = 100 % -40% = 60% (b) Calculation of Contribution Margin per unit = Selling price * CM ratio Contribution = $100 * 60% Margin per unit = $60 per unit (c) Calculation of Annual Fixed Cost = Monthly Fixed Cost * 12 Annual Fixed Cost = $116,000 * 12 = $1,392,000 (d) Calculation of Annual Breakeven Point in Sales Dollars = Annual Fixed Cost / CM Ratio Annual Breakeven = $1,392,000 / 60% Point = $2,320,000