Ivanhoe Monograms sells stadium blankets that have been monogrammed with high school and...

Question:

Ivanhoe Monograms sells stadium blankets that have been monogrammed with high school and university emblems. The blankets retail for $45 throughout the country to loyal alumni of over 3,500 schools. Ivanhoe's variable costs are 41% of sales; fixed costs are $118,000 per month. Ivanhoe currently sells 130,000 blankets per year. If sales volume were to increase by 16%, by how much would operate income increase? (Round answer to 0 decimal places, e.g. 5,275.)

Contribution Margin:

To find the contribution margin of a product, the variable costs are subtracted from the sales price. This margin determines what amount of sales is available for fixed costs and operating income.

Answer and Explanation: 1

Become a Study.com member to unlock this answer!

View this answer

We begin by finding the contribution margin ratio of each blanket:

  • 100% - 41% = 59%

We multiply this by the sales price to find the contribution...

See full answer below.


Learn more about this topic:

Loading...
Contribution Margin: Definition & Formula

from

Chapter 22 / Lesson 20
6.2K

Understand what the contribution margin is. Learn the definition of contribution margin and understand its importance in business. Discover how to calculate it through examples.


Related to this Question

Explore our homework questions and answers library