Question

Bluegill Company sells 12,800 units at $220 per unit. Fixed costs are $140,800 and income from operations is $985,600. 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

Solution a:

Total contribution margin =Fixed costs + Income from operations

= $140,800 + $985,600 =$1,126,400

Contribution margin per unit = Total contribution margin / Total unit = $1,126,400 / 12800 = $88 per unit

Variable cost per unit = Selling price - Contribution margin per unit = $220 - $88 = $132 per unit

Solution b:

Unit contribution margin = Total contribution margin / Total unit = $1,126,400 / 12800 = $88 per unit

Solution c:

Contribution margin ratio = Contribution margin per unit / selling price per unit = $88 / $220 = 40%