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?
$___
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 |
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