Sally Company sells 22,000 units at $23 per unit. Variable costs are $17.02 per unit, and fixed costs are $46,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.
Ans. A | Contribution margin ratio = (Selling price per unit - Variable cost per unit) / Selling price per unit * 100 | |||
($23 - $17.02) / $23 * 100 | ||||
$5.98 / $23 * 100 | ||||
26.00% | ||||
*Contribution margin ratio is the ratio (in percentage) of Contribution margin and sales. | ||||
Ans. B | Contribution margin per unit = Selling price per unit - Variable cost per unit | |||
$23 - $17.02 | ||||
$5.98 | per unit | |||
*Contribution margin per unit is the difference between selling price per unit and variable cost per unit. | ||||
Ans. C | ||||
Particulars | Total | Per unit | ||
Sales (22,000 * $23) | $506,000 | $23.00 | ||
Variable expenses (22,000 * $17.02) | -$374,440 | -$17.02 | ||
Contribution margin | $131,560 | $5.98 | ||
Fixed expenses | -$46,000 | |||
Income From Operations | $85,560 | |||
*Income from operations is the net income from sales less total costs (variable costs and fixed costs). | ||||
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