Homework SourseLast month when Holiday Creations Inc sold 39000 units total
Last month when Holiday Creations, Inc., sold 39,000 units, total sales were $314,000, total variable expenses were $235,500, and fixed expenses were $38,100.
Last month when Holiday Creations, Inc., sold 39,000 units, total sales were $314,000, total variable expenses were $235,500, and fixed expenses were $38,100.
Exercise 5-4 Computing and Using the CM Ratio [LO 5-3] Last month when Holiday Creations, Inc., sold 39,000 units, total sales were $314,000, total variable expenses were $235,500, and fixed expenses were $38,100. Required: 1. What is the company\'s contribution margin (CM) ratio? ntribution margin ratio 2. Estimate the change in the company\'s net operating income if it were to increase its total sales by $2,700 ed change in net operating income References Worksheet Solution
1. CM Ratio = (Total Sales - Total Variable Expenses) / Total Sales *100
= ( $ 314,000 - $ 235,500 ) / $ 314,000 * 100
= 25%
Hence, the correct answer is 25%
2.
Current Net Operating Income= Contribution Margin - Fixed Expenses
= ( Sales * Contribution Margin Ratio ) - Fixed Expenses
= ( $ 314,000 * 25%) - $ 38,100
= $ 40,400
Revised Sales = $ 314,000 + $ 2,700
= $ 316,700
Revised Net Operating Income= Contribution Margin - Fixed Expenses
= ( Sales * Contribution Margin Ratio ) - Fixed Expenses
= ( $ 316,700* 25%) - $ 38,100
= $ 41,075
Hence, Change in Net Operating Income = $ 41,075 - $ 40,400
= $ 675
Hence, the correct answer is $675
