Shown here is an income statement in the traditional format for a firm with a sales volume of...
Question:
Shown here is an income statement in the traditional format for a firm with a sales volume of 20,000 units. Cost formulas also are shown:
| Revenues | $200,000 |
| Cost of goods sold ($36,000 + $5.20/unit) | 140,000 |
| Gross profit | $60,000 |
| Operating expenses: | |
| Selling ($9,200 + $0.30/unit) | 15,200 |
| Administration ($18,800 + $0.50/unit) | 28,800 |
| Operating income | $16,000 |
a. Prepare an income statement in the contribution margin format.
b. Calculate the contribution margin per unit and the contribution margin ratio.
Contribution Margin:
The contribution margin can be calculated for single unit of a product or in terms of total cost. It is the value received after deducting variable cost of the product from its selling price.
Answer and Explanation: 1
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| Particulars | Amount | Calculation | |
|---|---|---|---|
| Revenue (A) | 200,000 | 20,000 * 10 | |
| Variable expenses: | |||
| Cost of goods sold | 104,000 | 20,000 * 5.20 | |
| Add: | Selling... |
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Contribution Margin: Definition & Formula
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Chapter 22 / Lesson 20
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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.
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