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

Calculating contribution margin

Glenn Company sells a product for \(80 per unit. Variable costs are \)60 per unit, and fixed costs are $800 per month. The company expects to sell 560 units in September. Calculate the contribution margin per unit, in total, and as a ratio.

Short Answer

Expert verified
  1. Contribution margin per unit=$20
  2. Contribution margin in total = $11,200
  3. Contribution margin ratio = 25%

Step by step solution

01

Calculation of contribution margin per unit

Contributionmarginperunit=Salespriceperunit-variablecostperunit=$80-$60=$20

02

Calculation of contribution margin in total

Contributionmarginintotal=Totalsalesinunits×contributionmarginperunit=560Units×$20=$11,200

03

Calculation of contribution margin ratio

Contributionmarginratio=ContributionmarginNetsalesrevenue=$11,200$44,800=25%

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

Study anywhere. Anytime. Across all devices.

Sign-up for free