Question

United Merchants Company sells 38,000 units at $20 per unit. Variable costs are $14.20 per unit, and fixed costs are $108,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations. a. Contribution margin ratio (Enter as a whole number.) fill in the blank 1 % b. Unit contribution margin (Round to the nearest cent.) $fill in the blank 2 per unit c. Income from operations

Answer 1

Answer and Explanation:

The computation is shown below:

a. The contribution margin ratio is

= (Selling price - variable cost) ÷ (Selling price)

= ($20 - $14.20) ÷ $20)

= 29%

b. The contribution margin per unit is

= (Selling price - variable cost)

= ($20 - $14.20)

= $5.80

c. The income from operations is

= $5.80 × 38,000 units - $108,000

= $112,400