Chapter 3, Problem 3.47P

1.

To determine

Contribution Margin:

Contribution margin is the excess of selling price over the variable costs of a product. It is a tool to evaluate the capability of the company to generate sufficient revenue so as to cover its variable cost.

Formula to calculate contribution margin:

$\text{Contribution margin per unit}=\text{Selling price}-\text{Variable cost}$

Gross Margin:

Gross margin is the sum total of all the revenue generated from sales after deducting all the production related costs.

Formula to calculate contribution margin:

$\text{Gross Margin}=\frac{\text{Total sales revenue}-\text{cost of goods sole}}{\text{Total sales}}$

To compute: Operating profit or loss.

2.

To determine

To compute: Operating profit or loss.