a Young Company budgets sales of 850000 fixed costs of 23000

a. Young Company budgets sales of $850,000, fixed costs of $23,000, and variable costs of $102,000. What is the contribution margin ratio for Young Company? (Enter your answer as a whole number.)
%

b. If the contribution margin ratio for Martinez Company is 59%, sales were $590,000, and fixed costs were $275,000, what is the income from operations?

Solution

Solution a:

Budgeted sales = $850,000

Variable costs = $102,000

Contribution Margin = Sales - variable costs = $850000 - $102000 = $748,000

Contribution Margin ratio = Contribution Margin / Sales = $748000/ $850000 = 88%

Solution b:

Contribution margin ratio = 59%

Sales = $590,000

contribution margin = Sales *Contribution margin ratio = $590000 *59% = $348,100

Income from operations = Contribution Margin - Fixed costs = $348100 - $275000 = $73,100