Question

Bluegill Company sells 11,000 units at $140 per unit. Fixed costs are $77,000, and income from operations is $693,000. 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

First to calculate Calculate contribution margin and then Variable Cost

	Equation	Answer
Sales Revenue	11000 x 140	1,540,000
Less : Variable Cost	Sales Revenue - Contribution Margin (2)	770,000
Contribution Margin	Operation Income + Fixed Expense (1)	770,000
Less : Fixed Expenses		77,000
Operation Income		693,000

a. Variable Cost Per Unit =

Total Variable expense / Total Units = 770000 / 11000 = 70

b. Unit Contribution Margin =

Contribution margin / Total units = 770000 / 11000 = 70

c. Contribution Margin Ratio =

Contribution Margin / sales x 100 % = 770000 / 1540000 x 100% = 50%