I need help with the blanksSolutionb Contribution margin for
I need help with the blanks
Solution
(b) Contribution margin for alternative 1: $1353300/$3175050 = 43%
Contribution margin for alternative 2: $624600/$2602500 = 24%
Break-even point for alternative 1: $884850/43% = $2057791
Break-even point for alternative 2: $791160/24% = $3296500
Alternative 1 is recommended.
Working:
| Alternative 1 | Alternative 2 | ||
| Sales | 3175050 | 2602500 | |
| Variable expenses | 1821750 | 1977900 | [$1821750 + (6% x $2602500)] |
| Contribution margin | 1353300 | 624600 | |
| Fixed expenses | 884850 | 791160 | [$884850 - $156150 + $62460] |
