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Chapter 20: Q20-10RQ (page 1119)

What are the three ways contribution margin can be ex

Short Answer

Expert verified

Answer

  1. Contribution per unit
  2. Contribution margin ratio
  3. Contribution margin income statement

Step by step solution

01

Contribution per unit

Unit contribution margin = Net sales revenue per unit 鈭� Variable costs per unit

02

Contribution margin ratio

Contribution margin ratio = Unit Contribution margin / Net sales revenue per unit

03

Contribution margin income statement

Traditional Income Statement

Contribution Margin Income Statement

Net Sales Revenue

Net Sales Revenue

Less: Cost of goods sold

Less: Variable costs

Gross Profit

Contribution margin

Less: Selling and administrative expenses

Less: Fixed costs

Operating Income

Operating income

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Most popular questions from this chapter

What is the relevant range?

Use the following information to complete Short Exercises S20-16 and S20-17.

Wild Waters Swim Park sells individual and family tickets. With a ticket, each person receives a meal, three beverages, and unlimited use of the swimming pools. Wild Waters has the following ticket prices and variable costs for 2018:

Individual Family Sales price per ticket \( 50 \) 150 Variable cost per ticket 35 140

Wild Waters expects to sell one individual ticket for every four family tickets. Wild Waters鈥檚 total fixed costs are $27,500.

S20-17 Calculating breakeven point for two products

For 2019, Wild Waters expects a sales mix of four individual tickets for every one family ticket.

Requirements

1. Compute the new weighted-average contribution margin per ticket.

2. Calculate the total number of tickets Wild Waters must sell to break even.

3. Calculate the number of individual tickets and the number of family tickets the company must sell to break even.

What is sensitivity analysis? How do managers use this tool

Question: Computing contribution margin in total, per unit, and as a ratio

Complete the table below for contribution margin per unit, total contribution margin, and contribution margin ratio:

A B C Number of units 1,720 units 14,920 units 4,620 units

Sales price per unit \( 1,800 \) 4,500 $ 5,550

Variable costs per unit 720 3,600 1,665

Calculate: 鈥冣�冣�� 鈥� 鈥冣�冣�� 鈥冣�冣�� 鈥� 鈥�

Contribution margin per unit 鈥冣�冣�� 鈥冣�冣�� 鈥� 鈥冣�冣�� 鈥冣�冣�� 鈥� 鈥�

Total contribution margin 鈥冣�冣�� 鈥冣�冣�� 鈥� 鈥冣�冣�� 鈥� 鈥冣�冣�� 鈥� 鈥�

Contribution margin ratio

What is operating leverage? What does it mean if a company has a degree of operating leverage of 3?
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