BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773

Solutions

Chapter
Section
BuyFindarrow_forward

Managerial Accounting: The Corners...

7th Edition
Maryanne M. Mowen + 2 others
ISBN: 9781337115773
Textbook Problem
6 views

Variable Cost Ratio, Contribution Margin Ratio

Head-First Company plans to sell 5,000 bicycle helmets at $75 each in the coming year. Unit variable cost is $45 (includes direct materials, direct labor, variable factory overhead, and variable selling expense). Fixed factory overhead is $20,000, and fixed selling and administrative expense is $29,500.

Required:

  1. 1. Calculate the variable cost ratio.
  2. 2. Calculate the contribution margin ratio.
  3. 3. Prepare a contribution margin income statement based on the budgeted figures for next year. In a column next to the income statement, show the percentages based on sales for sales, total variable cost, and total contribution margin.

1.

To determine

Compute the variable cost ratio.

Explanation

Variable Cost:

Variable cost is the cost which changes with the change in the level of output. In other words, variable cost increases with the increase in units produced and decreases with the decrease in units produced.

Use the following formula to compute the variable cost ratio:

Variable Cost Ratio=Variable cost per unitPrice

Substitute $45 for variable cost per unit and $75 for price

2.

To determine

Compute the contribution margin ratio.

3.

To determine

Make the contribution margin income statement for Company H.

Still sussing out bartleby?

Check out a sample textbook solution.

See a sample solution

The Solution to Your Study Problems

Bartleby provides explanations to thousands of textbook problems written by our experts, many with advanced degrees!

Get Started

Additional Business Solutions

Find more solutions based on key concepts

Show solutions add

What are the key features of a POS system?

Accounting Information Systems

What is inflation and what causes it?

Principles of Microeconomics (MindTap Course List)

(Oligopoly Power) What are three sources of oligopolies?

ECON: MICRO4 (New, Engaging Titles from 4LTR Press)

COST OF COMMON EQUITY The Bouchard Companys EPS was 6 50 in 2014, up from 4 42 in 2009. The company pays out 40...

Fundamentals of Financial Management, Concise Edition (with Thomson ONE - Business School Edition, 1 term (6 months) Printed Access Card) (MindTap Course List)