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Zinaida [17]
3 years ago
11

Current operating income for Bay Area Cycles Co. is $40,000. Selling price per unit is $100, the contribution margin ratio is 20

%, and fixed expense is $160,000. Required: 1. Calculate Bay Area Cycle’s per unit variable expense and contribution margin. How many units are currently being sold?
Business
1 answer:
svlad2 [7]3 years ago
6 0

Answer:

Instructions are below.

Explanation:

Giving the following information:

Operating income=  $40,000.

Selling price per unit is $100

Contribution margin ratio= 0.20

Fixed expense is $160,000

<u>First, we need to calculate the unitary variable cost. We can use the contribution margin ratio formula:</u>

<u></u>

contribution margin ratio= (selling price - unitary variable cost) / selling price

0.2 = (100 - unitary variable cost) / 100

unitary variable cost= 80

<u>Now, the contribution margin:</u>

Contribution margin= 100 - 80= $20

<u>Finally, the number of units being sold:</u>

Total contribution margin= operating income + fixed costs

Total contribution margin= 40,000 + 160,000= 200,000

Unitary contribution margin= Total contribution margin/number of units

20= 200,000 / number of units

number of units= 200,000/20

number of units= 10,000 units

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Juli2301 [7.4K]

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Global account structure.

Explanation:

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Inflation rate:

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