Question

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Contribution Margin United Merchants Company sells 24,000 units at $22 per unit. Variable costs are $15.18 per unit, and fixed costs are $83,500. 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

Answer 1

Answers:

a	Contribution margin ratio	31	%
b	Unit contribution margin	$6.82	per unit
c	Income from operations	$80,180

Calculations:

Unit contribution margin = Selling price per unit - Variable cost per unit

= $22 - $15.18

= $6.82

Contribution margin ratio = (Unit contribution margin ÷ Selling price per unit ) x 100

= (6.82/22) x 100

= 0.31 x 100

= 31%

Income from operations = Total contribution margin - Total fixed costs =

(24,000 units x $6.82) - $83,500

=$163,680-$83,500

= $80,180