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:
|Cost of goods sold ($36,000 + $5.20/unit)||140,000|
|Selling ($9,200 + $0.30/unit)||15,200|
|Administration ($18,800 + $0.50/unit)||28,800|
a. Prepare an income statement in the contribution margin format.
b. Calculate the contribution margin per unit and the contribution margin ratio.
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
|Revenue (A)||200,000||20,000 * 10|
|Cost of goods sold||104,000||20,000 * 5.20|
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fromChapter 22 / Lesson 20
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.