Question

Question: Chaney Company provides lawn care services. Following are data for a recent week:

Service Revenue \(1,300

Variable Costs \)780

Contribution Margin $520 Chaney provided service to 25 customers during the week. Determine the average amount the company charged each customer, the variable cost per customer, and the contribution margin ratio.

Short answer

Answer

The average service price is $52, the variable cost per unit is $31.20, and the contribution margin ratio is 40%.

Step-by-step solution

Calculation of the average amount the company charged each customer

Average service price = Service Revenue/No. of customers

=$1,300/25

=$52

Calculation of variable cost per customer

Variable cost per customer = Variable cost/No. of customers

=$780/25

=$31.20

Profitability analysis based on contribution margin ratio

Particulars	Amount
Net sales revenue	$1,300
Less: Variable cost	$780
Contribution Margin	$520
Contribution margin ratio (Contribution margin/net sales revenue)	40%