Question

eBook Show Me How Calculator Print Item Contribution Margin Molly Company sells 27,000 units at $46 per unit. Variable costs are $31.74 per unit, and fixed costs are $115,500. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations. a. Contribution margin ratio (Enter as a whole number) b. Unit contribution margin (Round to the nearest cent.) per unit c. Income from operations Check My Work

Answer 1

Ans:

(a) Contribution margin ratio = (Sales - Variable Expenses)/Sales

Firstly we will calculate sales and variable expenses,

Sales = 27,000 × $46 per unit = $1,242,000

Variable expenses = 27,000 × $31.74 per unit = $856,980

Contribution margin ratio = [($1,242,000 - $856,980)/$1,242,000] × 100

Contribution margin ratio = 31%

(b) Unit contribution margin = Selling price per unit - Variable cost per unit

= $46 - $31.74

= $14.26 per unit

(c)

Sales	$1,242,000
Less: Variable cost	$856,980
Contribution margin	$385,020
Less: Fixed cost	$115,500
Income from operations	$269,520