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

CONTRIBUTION MARGIN = $67,000

CONTRIBUTION MARGIN RATIO = 53.6%

Step-by-step 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,

`(SALES - VARIABLE COST)/(SALES)\\` *100%

`(125,000-58,000)/(125,000)` *100% = 53.6%

Answer 2

Contribution margin = $67,000

contribution margin ratio = 0.536

Step-by-step 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