Chapter 5, Problem 10E

A.

To determine

Contribution Margin: It is defined as the difference between the sales and the variable cost.

Contribution Margin ratio: It is a ratio that measures the contribution margin generated by the company from the sales to make it avialable for paying the fixed cost and generate a profit. It is expressed as percentage of margin available from each dollar sales to pay fixed expenses and to provide profit. It is also called as profit-volume ratio. The formula to calculate the contribution margin ratio is as follows:

$\text{Contribution}\text{Margin}\text{Ratio }=\frac{\text{Contribution}\text{Margin}}{\text{Sales}}\times 100$

contribution margin for M Company.

B.

To determine

contribution margin ratio for M Company.

C.

To determine

the increase in income from operations.