Question

Waite Company sells 250,000 units at 120 per unit. Variable costs are 78 per unit, and fixed costs are 8,175,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) operating income. a. Contribution margin ratio % b. Unit contribution margin $ per unit c. Operating income

Answer 1

Answer:

Instructions are below.

Explanation:

Giving the following information:

Waite Company sells 250,000 units at 120 per unit. Variable costs are 78 per unit, and fixed costs are 8,175,000.

The contribution margin ratio is calculated using the following formula:

Contribution margin ratio= contribution margin / selling price

Contribution margin ratio= (120 - 78) / 120= 0.35

Unitary contribution margin= selling price - unitary variable cost

Unitary contribution margin= 120 - 78= 42

The operating income is the result of deducting from the total contribution margin the fixed costs:

Sales= 250,000*120= 30,000,000

Variable costs= 250,000*78= (19,500,000)

Total contribution margin= 10,500,000

Fixed costs= (8,175,000)

Net operating income= 2,325,000