Question

Lanning Company sells 160,000 units at $45 per unit. Variable costs are $27 per unit, and fixed costs are $975,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations. a. Contribution margin ratio % b. Unit contribution margin $ per unit c. Income from operations

Answer 1

Answer:

a. Contribution margin ratio = Contribution per unit/selling price

                                              = $18/$$5

                                              = 0.4 = 40%

b.    Contribution per unit = Selling price - Variable cost per unit

                                       = $45 - $27

                                       = $18

c. Income from operations                         $

Total contribution ($18 x 160,000 units)  2,880,000

Less: Fixed cost                                            975,000

Income from operations                           1,905,000

Explanation:

Contribution margin ratio is the ratio of contribution per unit to selling price

Contribution per unit is the excess of selling price over variable cost per unit

Income from operation is the excess of total contribution over fixed cost