A Trek Cycles manufactures and sells bicycles to retailers. The X-1 model sells for $500 and has per-unit variable costs of $300 associated with its production. The company has fixed expenses of $30,000 per month. In May, the company sold 300 of the X-1 model bikes. Show your calculations for full credit. Calculate the contribution margin per unit for the Bomber. Calculate the contribution margin ratio of the Bomber. Prepare a contribution margin income statement for the month of May.

Instructions are below.

Explanation:

Giving the following information:

Selling price = $500

Unitary variable cost = $300

Fixed costs = $30,000

Units sold = 300

First, we need to calculate the contribution margin:

Contribution margin = 500 - 300 = $200

Now, the contribution margin ratio:

Contribution margin ratio = contribution margin/selling price

Contribution margin ratio = 200/500 = 0.4

Finally, the contribution margin income statement:

Sales = 500*300 = 150,000

Total variable cost = 300*300 = (90,000)

Contribution margin = 60,000

Fixed costs = (30,000)

Net operating income = 30,000