Elon Company sells 6,000 units at $80 per unit. Variable costs are $50 per unit, and fixed costs are $50,000.

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