Question

4. Contribution Margin Ratio

a. Yountz Company budgets sales of $950,000, fixed costs of $21,400, and variable costs of $95,000. What is the contribution margin ratio for Yountz Company? (Enter your answer as a whole number.)
%____

b. If the contribution margin ratio for Vera Company is 48%, sales were $833,000, and fixed costs were $291,880, what was the income from operations?
$___

Answer 1

1) Contribution Margin Ratio = 90%

Contribution Margin Ratio = Margin Ratio / Net Sales x 100

Net Sales = 950000

Contribution Margin = Net Sales Revenue - Variable Cost = 950000 - 95000 = 855000

So Contribution Margin Ratio = 855000 / 950000 x 100

= 0.9 x 100 = 90%

2)  

Net Income Will be 107960

Net Sales = 833000

Fixed Cost = 291880

Contribution Margin Ratio = 48%

So Contribution Margin = Net Sales x Contribution Margin Ratio

= 833000 x 0.48 = 399840

Then Variable Cost will be = Net Sales - Contribution Margin = 833000 - 399840 = 433160

Then Net Income as follows:

Income Statement
Sales Revenue	833,000
Less : Variable Cost	(433,160)
Contribution Margin	399,840
Less : Fixed Cost	(291,880)
Net Income	107,960