Answer:
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
