Question

Dana’s company sells three handcrafted china products: bowls, plates, and cups. The bowls bring in $125,000 in sales, with variable costs of $58,000. The fixed costs for the company amount to $30,000. What are the contribution margin and the contribution margin ratio for the bowls?

Answer 1

Answer:

Contribution margin = $67,000

contribution margin ratio = 0.536

Explanation:

Data provided :

The total sales of bowls = $125,000

Total variable cost for bowls =  $58,000

Fixed costs for the company = $30,000

Now,

The contribution margin is given as:

Contribution margin = Total sales - Variable cost

or

Contribution margin = $125,000 - $58,000 = $67,000

and,

the contribution margin ratio = $\frac{\textup{Contribution margin}}{\textup{Total sales}}$

or

the contribution margin ratio = $\frac{\ \textup{67,000}}{\ \textup{125,000}}$

or

the contribution margin ratio = 0.536

Answer 2

Answer:

CONTRIBUTION MARGIN = $67,000

CONTRIBUTION MARGIN RATIO = 53.6%

Explanation:

• TO CALCULATE THE CONTRIBUTION MARGIN PER UNIT FOR DANA'S COMPANY, THE FORMULA BELOW IS USED

$\frac{SALES - VARIABLE COST}$

$\frac{ 125,000- 58,000}$ = $67,000

• TO CALCULATE CONTRIBUTION MARGIN RATIO,

$\frac{SALES - VARIABLE COST}{SALES}$ *100%

$\frac{125,000-58,000}{125,000}$ *100% = 53.6%