Question

PB1.

LO 3.1A company sells mulch by the cubic yard. Grade A much sells for $150 per cubic yard and has variable costs of $65 per cubic yard. The company has fixed expenses of $15,000 per month. In August, the company sold 240 cubic yards of Grade A mulch.

Calculate the contribution margin per unit for Grade A mulch.
Calculate the contribution margin ratio of the Grade A mulch.
Prepare a contribution margin income statement for the month of August.

Answer 1

Contribution margin per unit = $85 per cubic yard

Contribution margin ratio = 56.67%

Step-by-step explanation:

The computations are calculated below:

Contribution margin per unit = Selling price per cubic yard - variable cost cubic yard

= $150 - $65

= $85 per cubic yard

Contribution margin ratio would be

= (Contribution margin per cubic yard) ÷ (Selling price per cubic yard) × 100

= ($85) ÷ ($150) × 100

= 56.67%

And, The statement of contribution margin income for the month of August is shown below:

Sales (240 cubic yards × $150) $36,000

Less: Variable cost (240 cubic yards × $65) ($15,600)

Contribution margin $20,400

Less: Fixed expenses per month ($15,000)

Net income $5,400