Question

Spartan Systems reported total sales of $374,400, at a price of $24 and per unit variable expenses of $13, for the sales of their single product. Total Per Unit Sales $ 374,400 $ 24 Variable expenses 202,800 13 Contribution margin 171,600 $ 11 Fixed expenses 95,000 Net operating income $ 76,600 What is the amount of contribution margin if sales volume increases by 25%

Answer 1

Answer:

$214,500

Explanation:

For the computation of the amount of contribution margin first we need to follow some steps which are shown below:

No of units sold = Total sales ÷ selling price per unit

= $374,400 ÷ $24

= $156,00

Variable cost = No of units sold × Variable cost per unit

Variable cost = $15,600 × $13

=$202,800

Contribution margin = Sales - Variable cost

= $374,400 - $202,800

= $171,600

CM ratio = Contribution margin ÷ Sales

= $171,600 ÷ $374,400

= 0.46

Contribution margin = CM ratio × Sales Contribution margin

= 0.46 × (1.25 × $374,400)

= $214,500