Question

Contribution Margin Willie Company sells 24,000 units at $33 per unit. Variable costs are $21.78 per unit, and fixed costs are $134,600.
Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) operating income.
a. Contribution margin ratio (Enter as a whole number.) ______ %
b. Unit contribution margin (Round to the nearest cent.) $_______ per unit
c. Operating income $______

Answer 1

Answer:

a. 0.34 or 34 %

b. $11.22

c. $134,680

Explanation:

Unit Contribution Margin = Sales per unit  - Variable Costs per unit

                                            = $33.00 - $21.78

                                            = $11.22

Contribution margin ratio = Contribution ÷ Sales

                                          = $11.22 ÷ $33.00

                                          = 0.34

Operating Income = Contribution - Fixed Cost

                               = ($11.22 x 24,000 units) - $134,600

                               = $134,680