Question

Carmelita Company sells 40,000 units at $18 per unit. Variable costs are $10 per unit, and fixed costs are $62,000. What is the unit contribution margin? _________________________ What is the contribution margin ratio? _________________________ What is income from operations? ___________________________

Answer 1

1. 44.44%

2. $258,000

Step-by-step explanation:

Contribution Margin refers to what is left of sales income after the Variable Costs have been removed.

= Sales price - Variable cost

= 18 - 10

= $8

Contribution Margin Ratio = (Contribution Margin / Sales price) * 100%

= 44.44%

2. Income from Operations

= (Sales Quantity * Contribution Margin) - Fixed Costs

= (40,000 * 8) - 62,000

= 320,000 - 62,000

= $258,000