Contribution Margin Ratio a Yountz Company budgets sales of

Contribution Margin Ratio

a. Yountz Company budgets sales of $730,000, fixed costs of $49,300, and variable costs of $219,000. What is the contribution margin ratio for Yountz Company? (Enter your answer as a whole number.)
%

b. If the contribution margin ratio for Vera Company is 41%, sales were $781,000, and fixed costs were $233,750, what was the income from operations?
$

Solution

Answer a.

Contribution Margin = Sales - Variable Costs
Contribution Margin = $730,000 - $219,000
Contribution Margin = $511,000

Contribution Margin Ratio = Contribution Margin / Sales
Contribution Margin Ratio = $511,000 / $730,000
Contribution Margin Ratio = 70%

Answer b.

Contribution Margin Ratio = Contribution Margin / Sales
41% = Contribution Margin / $781,000
Contribution Margin = $320,210

Income from Operations = Contribution Margin - Fixed Costs
Income from Operations = $320,210 - $233,750
Income from Operations = $86,460