ZZ Tire Company opened a new location last year. Use the following information to figure out...
ZZ Tire Company opened a new location last year. Use the following information to figure out contribution margin and operating income for last year:
Tires sold: 15,000
Retail Price per tire: $75 per tire
Cost per tire: $18 per tire
Installation expense per tire (payroll): $9 per tire
Utilities: $2,000 per month
Rent: $3,500 per month
Clerks and phone receptionist: $2,500 per month
Homework Answers
Total Variable cost Per Unit = cost Per Unit + Installation Expenses = 18 +9 = $27
Fixed cost = Unilities + Rent clerk and Phone Receptionist = 2000+3500+2,500 = $8,000
contibution Margin = ( Selling Price -Variable cost) * Tires
Contibution Margin = (75-27) *15,000 =720,000 (Answer)
Operating income = Contibution Margin -( Fixed cost * 12)
Operating income = 720,000-(8,000*12) = $624,000 (Answer)
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