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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883

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Survey of Accounting (Accounting I)

8th Edition
Carl Warren
ISBN: 9781305961883
Textbook Problem

Contribution margin ratio
a. Matzinger Company budgets sales of $10,400,000, fixed costs of $1,100,000, and variable-costs of $6,656,000. What is the contribution margin ratio for Matzinger Company?
b.If the contribution margin ratio for Raynor Company is 41%, sales are $6,200,000, and fixed costs are $1,350,000, what is the operating income?

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis:

The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows:

Contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

Requirement-a:

To Calculate:

The Contribution Margin Ratio

Explanation

The Contribution Margin Ratio is calculated as follows:

Contribution margin = Sales - Variable cost...

To determine

Concept Introduction:

Cost Volume Profit (CVP) Analysis:

The Cost Volume Profit analysis is the analysis of the relation between cost, volume, and profit of a product. It analyzes the cost and profits at the different level of production, in order to determine the breakeven point and required the level of sales to earn the desired profit.

Contribution margin means the margin that is left with the company after recovering variable cost out of revenue earned by selling smart phones. The formula for contribution margin is as follows:

Contribution margin = Sales - Variable cost.

Similarly contribution margin ratio = Contribution/sales

Requirement-b:

To Calculate:

The Operating Income

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