Warning: foreach() argument must be of type array|object, bool given in /var/www/html/web/app/themes/studypress-core-theme/template-parts/header/mobile-offcanvas.php on line 20

Question: Computing contribution margin in total, per unit, and as a ratio

Complete the table below for contribution margin per unit, total contribution margin, and contribution margin ratio:

A B C Number of units 1,720 units 14,920 units 4,620 units

Sales price per unit \( 1,800 \) 4,500 $ 5,550

Variable costs per unit 720 3,600 1,665

Calculate:                  

Contribution margin per unit                      

Total contribution margin                        

Contribution margin ratio

Short Answer

Expert verified

Answer

  1. A=1,080,B=$900,C=$3,885
  2. A=$1,857,600,B=$13,428,000,C=$17,948,700
  3. A=60%,B=12%,C=70%

Step by step solution

01

Calculation of contribution margin per unit

Sales per unit

$1800

$4500

$5,550

Less: Variable cost

$720

$3600

$1,665

Contribution

$180

$900

$3,885

02

Calculation of total contribution margin 

Number of units

1,720

14,920

4,620

Contribution

$1,080

$900

$3,885

Total contribution

$1,857,600

$13,428,000

$17,948,700

03

Calculation of contribution margin ratio

Sales per unit

$1,800

$4800

$5,550

Contribution

$1,080

$900

$3,885

Contribution margin ratio

60%

12%

70%

Unlock Step-by-Step Solutions & Ace Your Exams!

  • Full Textbook Solutions

    Get detailed explanations and key concepts

  • Unlimited Al creation

    Al flashcards, explanations, exams and more...

  • Ads-free access

    To over 500 millions flashcards

  • Money-back guarantee

    We refund you if you fail your exam.

Over 30 million students worldwide already upgrade their learning with Vaia!

One App. One Place for Learning.

All the tools & learning materials you need for study success - in one app.

Get started for free

Most popular questions from this chapter

Question: Gilbert’s Steel Parts produces parts for the automobile industry. Thecompany has monthly fixed costs of \(640,220 and a contribution margin of85% of revenues.

Requirements

1. Compute Gilbert’s monthly breakeven sales in dollars. Use the contributionmargin ratio approach.

2. Use contribution margin income statements to compute Gilbert’s monthlyoperating income or operating loss if revenues are \)500,000 and if they are$1,050,000.

3. Do the results in Requirement 2 make sense given the breakeven sales youcomputed in Requirement 1? Explain.

Calculating breakeven point in units, contribution margin given Mackler, Inc. sells a product with a contribution margin of \(50 per unit. Fixed costs are \)8000 per month. How many units must Mackler sell to break even?

National Investor Group is opening an office in Portland, Oregon. Fixed monthly costs are office rent (\(8,100), depreciation on office furniture (\)1,700), utilities (\(2,000), special telephone lines (\)1,500), a connection with an online brokerage service (\(2,500), and the salary of a financial planner (\)5,200). Variable costs include payments to the financial planner (9% of revenue), advertising (11% of revenue), supplies and postage (4% of revenue), and usage fees for the telephone lines and computerized brokerage service (6% of revenue).

Requirements

  1. Use the contribution margin ratio approach to compute National’s breakeven revenue in dollars. If the average trade leads to \(1,000 in revenue for National, how many trades must be made to break even?
  2. Use the equation approach to compute the dollar revenues needed to earn a monthly target profit of \)12,600.
  3. Graph National’s CVP relationships. Assume that an average trade leads to \(1,000 in revenue for National. Show the breakeven point, the sales revenue line, the fixed cost line, the total cost line, the operating loss area, the operating income area, and the sales in units (trades) and dollars when monthly operating income of \)12,600 is earned.
  4. Suppose that the average revenue National earns increases to $1,500 per trade. Compute the new breakeven point in trades. How does this affect the breakeven point?

Calculating contribution margin ratio, preparing contribution margin income statements For its top managers, Worldwide Travel formats its income statement as follows:

Worldwide’s relevant range is between sales of \(253,000 and \)368,000. Requirements

1. Calculate the contribution margin ratio.

2. Prepare two contribution margin income statements: one at the \(253,000 sales level and one at the \)368,000 sales level. (Hint: The proportion of each sales dollar that goes toward variable costs is constant within the relevant range.)

Following is a list of costs for a furniture manufacturer that specializes in wood tables. Classify each cost as variable, fixed, or mixed relative to the number of tables produced and sold.

1. Wood used to build tables

2. Depreciation on saws and other manufacturing equipment

3. Compensation for sales representatives paid on a salary plus commission basis

4. Supervisor’s salary

5. Wages of production workers

See all solutions

Recommended explanations on Business Studies Textbooks

View all explanations

What do you think about this solution?

We value your feedback to improve our textbook solutions.

Study anywhere. Anytime. Across all devices.

Sign-up for free