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Introduction:
Contribution margin is the excess of sales over variable cost. In other words, sales minus variable cost equals contribution margin.
The missing amounts denoted by letters a to n
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Answer to Problem 27E
Solution:
The calculation of missing items is shown in the explanation section.
Explanation of Solution
Particulars | Company A | Company B | ||
Number of Units sold | 3200 (Note a) | 1975 | ||
Total | Per unit | Total | Per unit | |
Sales | $208000 | $65 | $82950 (Note h) | $42 (Note i) |
Variable Costs | 150400 | $47 (Note b) | $39500 | $20 (Note j) |
Contribution margin | $57600 (Note c) | $18 (Note (d) | 43450 | $22 (Note k) |
Fixed costs | $11200 (Note e) | $3.50 (Note f) | 19750 | $10 (Note l) |
Net income | $46400 | $14.50 (Note g) | $23700(Note m) | $12 (Note n) |
Working Notes:
- Calculation of number of units sold is as follows:
- Variable cost per unit in case of Company A:
- Contribution margin of Company A:
- Contribution margin per unit of Company A:
- Fixed cost of Company A:
- Calculation fixed cost per unit of Company A:
- Calculation of net income of Company A:
- Calculation of Sales of Company B:
- Calculation of sales per unit of Company B:
- Variable cost per unit of Company B:
- Contribution per unit of Company B:
- Calculation of Fixed cost per unit of Company B:
- Calculation of net income of Company B:
- Calculation of Net income per unit of Company B:
Number of units sold in Company A: =$208000/$65=3200 units
Variable cost per unit in case of Company A: &150400/3200=$47 per unit
Contribution Margin =$208000-$150400=$57600
=$57600/3200=$18 per unit
=$57600-$46400=$11200
=$11200/3200=$3.50 per unit
=$46400/3200=$14.50 per unit
=$43450+$39500=$82950
=$82950/1975=$42 per unit
=$39500/1975=@20 per unit
= $43450/1975=$22 per unit
= $19750/1975=$10 per unit
=$43450-$19750=$23700
=$23700/1975=$12 per unit
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Chapter 21 Solutions
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