Question

Using variable costing, service company Henry’s Helpers provides locksmith services. One type of service call is to evaluate private residences for security concerns and make recommendations for a safety plan. Use the data below to determine the company’s total contribution margin, contribution margin per service call, and contribution margin ratio when 220 service calls are made in the month of June.

Service Revenue $ 170 per service call

Variable Costs 68 per service call

Fixed Costs 21,040 per month

Short answer

The contribution margin ratio of the companyis $60%

Step-by-step solution

Calculation of total contribution margin and contribution margin per service call

Particulars	Total
Service revenue (220x170)	$37,400
Less: Variable cost (220x68)	$14,960
Contribution Margin	$22,440

Calculation of total contribution margin ratio for the company

Contribution Margin Ratio = Contribution Margin / Service Revenue

=$22,440/$37,400

=60%