Time Remaining 20 minutes 58 seconds00:20:58 Item 4Item 4 Time Remaining 20 minutes 58 seconds00:20:58 The following income statement is provided for Ramirez Company for the current year: Sales revenue (1,900 units * $19.40 per unit) $ 36,860 Cost of goods sold (variable; 1,900 units * $7.40 per unit) (14,060) Cost of goods sold (fixed) (3,400) Gross margin 19,400 Administrative salaries (5,400) Depreciation (3,400) Supplies (1,900 units * $1.40 per unit) (2,660) Net income $ 7,940 What amount was the company's contribution margin?

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3 February, 07:16

Time Remaining 20 minutes 58 seconds00:20:58 Item 4Item 4 Time Remaining 20 minutes 58 seconds00:20:58 The following income statement is provided for Ramirez Company for the current year: Sales revenue (1,900 units * $19.40 per unit) $ 36,860 Cost of goods sold (variable; 1,900 units * $7.40 per unit) (14,060) Cost of goods sold (fixed) (3,400) Gross margin 19,400 Administrative salaries (5,400) Depreciation (3,400) Supplies (1,900 units * $1.40 per unit) (2,660) Net income $ 7,940 What amount was the company's contribution margin?

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Nathanial West · Answer 1

Contribution margin is $10.60 per unit and $20,140 in total for 1900 units.

Explanation:

Contribution margin is the net of selling price of product and variable cost of product. It is a return which is available to cover fixed costs and make profit for the business.

All the variable cost are those which vary with the sales / production of products. variable costs are calculated by multiplying each unit cost with number of units.

Fixed costs are those which do not change with the change in the output volume. It remains fix whatever the sales / production level is.

Variable cost per unit

Cost of goods sold $7.40 per unit

Supplies $1.40 per unit

Total $8.80 per unit

Selling price = $19.40 per unit

Contribution margin = $19.40 - $8.80 = $10.60 per unit

Contribution margin = $10.60 x 1900 units = $20,140