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: Contribution margin per unit = Selling price − 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: Gross Margin = Total sales revenue − cost of goods sole Total sales To compute: Operating profit or loss.

Question

The Museum of America is preparing for its annual appreciation dinner for contributing members. Last year, 525 members attended the dinner. Tickets for the dinner were $24 per attendee. The profit report for last year’s dinner follows.Ticket sales $12,600 Cost of dinner 15,300 Gross margin (2,700) Invitations and paperwork 2,500 Profit (loss) $ (5,200) This year the dinner committee does not want to lose money on the dinner. To help achieve its goal, the committee analyzed last year’s costs. Of the $15,300 cost of the dinner, $9,000 were fixed costs and $6,300 were variable costs. Of the $2,500 cost of invitations and paperwork, $1,975 were fixed and $525 were variable Q.Prepare last year’s profit report using the contribution margin format.

Answer 1

Question

Chapter 3, Problem 3.52P

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:

Contribution margin per unit=Selling price−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:

Gross Margin=Total sales revenue−cost of goods soleTotal sales

To compute: Operating profit or loss.

2.

To determine

To compute: Operating profit or loss.

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