Contribution Margin Ferrante Company sells 31,000 units at $18 per unit. Variable costs are $10.62 per unit, and fixed costs are $75,500. 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 $fill in the blank
Contribution Margin
Ferrante Company sells 31,000 units at $18 per unit. Variable costs are $10.62 per unit, and fixed costs are $75,500.
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 | $fill in the blank 3 |
Contribution Margin is difference between sales value and variable cost. It can also be defined as excess of sales revenue over the variable cost. It is can be expressed in percentage terms.
Formula:
Contribution Margin Ratio = Sales Value - Variable cost / Sales Value x 100
Sales Value = $18 x 31000 units = $558000
Variable Cost = $10.62 x 31000 units = $329220
Contribution Margin Ratio = $558000 - $329220 / $558000 x 100
Contribution Margin Ratio = $228780 / $558000 x 100 = 41%
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