Question

The following information for the past year for the Blaine Corporation has been provided: Fixed costs:...

The following information for the past year for the Blaine Corporation has been provided:

Fixed costs: ​
Manufacturing $110,000
Marketing 16,000
Administrative 20,000
Variable costs: ​
Manufacturing $115,000
Marketing 22,000
Administrative 42,000

During the year, the company produced and sold 10,000 units of product at a selling price of $18.32 per unit. There was no beginning inventory of product at the beginning of the year.

What is the contribution margin ratio for Blaine Corporation (round to 1 decimal)?

-77.4%

-3376.2%

79.7%

2.3%
Business   Accounting   
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Answer #1

Answer is 2.3%

Total Variable Costs = Manufacturing + Marketing + Administrative
Total Variable Costs = $115,000 + $22,000 + $42,000
Total Variable Costs = $179,000

Variable Cost per unit = Total Variable Costs / Number of units produced and sold
Variable Cost per unit = $179,000 / 10,000
Variable Cost per unit = $17.90

Contribution Margin Ratio = (Selling Price per unit - Variable Cost per unit) / Selling Price per unit
Contribution Margin Ratio = ($18.32 - $17.90) / $18.32
Contribution Margin Ratio = 0.023 or 2.3%

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