Elon Company sells 6,000 units at $80 per unit. Variable costs are $50 per unit, and fixed costs are $50,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.
Answer:
a. 37.5% = ($80 – $50) ÷ $80, or ($480,000 – $300,000) ÷ $480,000
b. $30 per unit = $80 – $50
c. Sales………………………………… $480,000 (6,000 units × $80 per unit)
Variable costs……………………… 300,000 (6,000 units × $50 per unit)
Contribution margin……………… $180,000 (6,000 units × $30 per unit)
Fixed costs………………………… 50,000
Income from operations………… $130,000
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