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10 March, 17:47

A cement manufacturer has supplied the following dа ta:

Tons of cement produced and sold 220,000

Sales revenue $924,000

Variable manufacturing expense $297,000

Fixed manufacturing expense $280,000

Variable selling and adin expense $165,000

Fixed selling and admin expense $82,000

Net operating income $100,000

Required:

a. Calculate the company's unit contribution margin

b. Calculate the company's unit contribution ratio

c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?

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  1. 10 March, 17:56
    0
    a. Calculate the company's unit contribution margin

    $2.1

    b. Calculate the company's unit contribution ratio

    0.5 or 50%

    c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?

    $123,100

    Explanation:

    a.

    Unit price = $924,000 / 220,000 = $4.2

    -Variable cost per unit ($297,000 + 165,000) / 220,000 = $2.1

    =Contribution margin per unit = $2.1

    b.

    Contribution ratio = Contribution / Sales

    Contribution ratio = $2.1 / $4.2

    Contribution ratio = 0.5 = 50%

    c. If sale is Increased by 5%

    Number of unit = 220,000 x 105% = 231,000 units

    $

    Sales ($4.2 x 231,000) 970,200

    -Variable cost (2.1 x 231,000) 485,100

    =Gross Income 485,100

    -Fixed Cost (280,000 + 82,000) 362,000

    =Net operating Income 123,100
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