Question

Bluegill Company sells 10,300 units at $260 per unit. Fixed costs are $133,900, and operating income is $1,472,900. Determine the (a) variable cost per unit, (b) unit contribution margin, and (c) contribution margin ratio. Round the contribution margin ratio to two decimal places.

a. Variable cost per unit
b. Unit contribution margin
c. Contribution margin ratio

Answer 1

The variable cost per unit is $133, the unit contribution margin is $127, and the contribution margin ratio is 49%.

Step-by-step explanation:

To determine the variable cost per unit, we need to subtract the fixed costs from the total operating income and divide by the number of units sold. In this case, the variable cost per unit is ($1,472,900 - $133,900) / 10,300 = $133 per unit.

The unit contribution margin is the selling price per unit minus the variable cost per unit. In this case, the unit contribution margin is $260 - $133 = $127.

The contribution margin ratio is the unit contribution margin divided by the selling price per unit. In this case, the contribution margin ratio is $127 / $260 = 0.4877, which rounded to two decimal places is 0.49 or 49%.