Question

Bluegill Company sells 14,300 units at $200 per unit. Fixed costs are $143,000, and income from operations is $1,859,000. 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

Answer:

Contribution Margin = Income from Operation + Fixed Costs
Contribution Margin = $1,859,000 + $143,000
Contribution Margin = $2,002,000

Selling Price = Selling Price per Unit * No. of Units
Selling Price = $200 * 14,300
Selling Price = $2,860,000

Variable cost = Selling Price - Contribution Margin
Variable Cost = $2,860,000 - $2,002,000
Variable Cost = $858,000

Answer of Part a:
Variable cost per Unit = Variable cost / No. of Unit
Variable Cost per Unit = $858,000 / 14,300
Variable Cost per Unit = $60

Answer of Part b:

Contribution Margin per Unit = Selling price per Unit – Variable cost per unit
Contribution Margin per Unit = $200 - $60
Contribution Margin per unit = $140

Answer of Part C:

Contribution Margin Ratio = Contribution Margin per unit / Selling price per unit *100
Contribution Margin Ratio = $140 / $200 *100
Contribution Margin Ratio = 70%