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13 November, 15:32

Young Company budgets sales of $112,900,000, fixed costs of $25,000,000, and variable costs of $66,611,000. What is the contribution margin ratio for Young Company? (Enter your answer as a whole number.) % b. If the contribution margin ratio for Martinez Company is 40%, sales were $34,800,000, and fixed costs were $1,500,000, what is the income from operations?

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  1. 13 November, 15:41
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    a. The contribution margin ratio will be 41%

    b. The income from operations will be $12,420,000.

    Explanation:

    a. The sales are given at $112,900,000.

    The fixed costs are $25,000,000.

    The variable costs are $66,611,000.

    The contribution margin will be

    =Sales-variable costs

    =$ (112,900,000-66,611,000)

    =$46,289,000

    The contribution margin ratio will be

    = (Contribution margin/sales) * 100

    = ($46,289,000 / $112,900,000) * 100

    =41%

    b. Now, if the contribution margin ratio is 40%.

    The sales are given at $34,800,000.

    The fixed costs are $1,500,000.

    Income from operations or operating profit will be

    = (sales*contribution margin ratio) - fixed cost

    =$ (34,800,000*0.4) - $1,500,000

    =$12,420,000
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