Question

Molly Company sells 37,000 units at $36 per unit. Variable costs are $30.60 per unit, and fixed costs are $89,900.

Determine (a) the contribution margin ratio,

(b) the unit contribution margin, and

(c) income from operations.

a. Contribution margin ratio (Enter as a whole number.) %

b. Unit contribution margin (Round to the nearest cent.) $ per unit

c. Income from operations

Answer 1

Answer of Part a:

Contribution Margin per unit = Sales per unit – Variable Cost per unit
Contribution Margin per unit = $36 - $30.60
Contribution Margin per unit = $5.4

Contribution Margin Ratio = Contribution Margin per unit / Sales per unit *100
Contribution Margin Ratio = $5.4 / $36 *100
Contribution Margin Ratio = 15%

Answer of Part b:

Contribution Margin per unit = Sales per unit – Variable Cost per unit
Contribution Margin per unit = $36 - $30.60
Contribution Margin per unit = $5.4

Answer of Part c:

Sales = Unit * Selling price per unit
Sales = 37,000 * $36
Sales = $1,332,000

Variable Cost = Unit * Variable Cost per unit
Variable Cost = 37,000 * $30.60
Variable Cost = $1,132,200