Question

1. Yountz Company budgets sales of $1,190,000, fixed costs of $50,900, and variable costs of $226,100. What is the contribution margin ratio for Yountz Company? (Enter your answer as a whole number.)

2. If the contribution margin ratio for Vera Company is 53%, sales were $738,000, and fixed costs were $285,530, what was the income from operations?

Answer 1

1. Calculation of Contribution Margin ratio:

Contribution Margin ratio = ( Total Contribution Margin / Budgeted Sales ) * 100

= ( $ 963,900 / $ 1,190,000 ) * 100

= 81%

Total Contribution Margin = Budgeted Sales - Variable cost

= $ 1,190,000 - $ 226,100

= $ 963,900

Thus, Yountz Company's Contribution Margin ratio is 81%

2. Calculation of Income from operation:

Income from operation = Total Contribution Margin - Total fixed cost

= $ 391,140 - $ 285,530

= $ 105,610

Total Contribution Margin = Sales * Contribution Margin ratio

= $ 738,000 * 53%

= $ 391,140

Thus, Income from operations for vera companys is $ 391,140