Homework SourseLast month when Holiday Creations Inc sold 40000 units total
Last month when Holiday Creations, Inc., sold 40,000 units, total sales were $295,000, total variable expenses were $215,350, and fixed expenses were $39,300.
What is the company’s contribution margin (CM) ratio?
Estimate the change in the company’s net operating income if it were to increase its total sales by $2,200.
| Last month when Holiday Creations, Inc., sold 40,000 units, total sales were $295,000, total variable expenses were $215,350, and fixed expenses were $39,300. |
Solution
1. Calculate contribution margin ratio :
Contribution margin = 295000-215350 = 79650
Contribution margin ratio = 79650*100/295000 = 27%
2. Estimate the change in the company’s net operating income if it were to increase its total sales by $2,200.
Company\'s net income increase by (40944-40350) = $594
| Present | Proposed | |
| Sales | 295000 | 297200 |
| Contribution margin | 79650 | 80244 |
| Less : Fixed expenses | (39300) | (39300) |
| Net operating income | 40350 | 40944 |
