Homework SourseContribution Margin Approach Problem Consider the following
Contribution Margin Approach
Problem: Consider the following situation independently. Fill in the blanks with the appropriate information.
variable cost percentage
| Number of units sold | total variable cost | variable cost percentage | total contrabution margin | total fixed costs | net income/ (loss) |
| 1,800 | 30.0% | $756,000 | $54,000 |
Solution
We know that
Sales - Variable cost = Contribution margin
Contribution margin -Fixed costs = Net income/(loss)
Fixed costs = Contribution margin - Net income
Fixed costs = $702000
Contribution margin % =1-Variable cost %.
Contribution margin % = 1-0.30 = 0.70 or 70%
Total sales = Contribution margin/Contribution margin %
= $756000/70%
= $1080000
Variable cost = Sales * Variable cost% = $1080000*30% = $324000.
Total variable cost = $324000
