Question

Bluegill Company sells 13,000 units at $220 per unit. Fixed costs are $143,000 and income from operations is $1,287,000. Determine the following: Round the contribution margin ratio to two decimal places.

a. Variable cost per unit	$
b. Unit contribution margin	$	per unit
c. Contribution margin ratio		%

Answer 1

Solution:

Solution a) Contribution = Income from Operations + Fixed Cost

                         = $1,287,000 + $143,000

                         = $1,430,000

Solution b) Contribution per Unit = Total Contribution / Number of Units

                                         = $1,430,000 / 13000

                                         = $110 per unit

Variable Cost = Sales - Contribution

                        = $2,860,000 – $1,430,000 = $1,430,000

Solution c) Contribution Margin Ratio = (Total Contribution / Total Sales) x 100

                                                = ($1,430,000 / $2,860,000) x 100

                                                = 50%  

	Total $ (13,000 Units)	Per Unit $
Sales (13,000 units x $220.00)	28,60,000.00	220.00
Less: Variable Cost	14,30,000.00	110.00
Contribution (Income from Operations + Fixed Cost)	14,30,000.00	110.00
Less: Fixed Cost	1,43,000.00
Income from Operations	12,87,000.00