Question

Sally Company sells 22,000 units at $23 per unit. Variable costs are $17.02 per unit, and fixed costs are $46,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.

Answer 1

Ans. A	Contribution margin ratio = (Selling price per unit - Variable cost per unit) / Selling price per unit * 100
		($23 - $17.02) / $23 * 100
		$5.98 / $23 * 100
		26.00%
	*Contribution margin ratio is the ratio (in percentage) of Contribution margin and sales.
Ans. B	Contribution margin per unit = Selling price per unit - Variable cost per unit
		$23 - $17.02
		$5.98	per unit
	*Contribution margin per unit is the difference between selling price per unit and variable cost per unit.
Ans. C
	Particulars	Total	Per unit
	Sales (22,000 * $23)	$506,000	$23.00
	Variable expenses (22,000 * $17.02)	-$374,440	-$17.02
	Contribution margin	$131,560	$5.98
	Fixed expenses	-$46,000
	Income From Operations	$85,560
	*Income from operations is the net income from sales less total costs (variable costs and fixed costs).