Course Hero - $2,842,000 Contribution margin ratio = 36.74%...

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A tile manufacturer has supplied the following data: Boxes of tile produced and sold 580,000 Sales revenue $2,842,000 Variable manufacturing expense $1,653,000 Fixed manufacturing expense $784,000 Variable selling and admin expense $145,000 Fixed selling and admin expense $128,000 Net operating income $132,000 Required: a. Calculate the company's unit contribution margin Contribution margin = Sales - Variable expenses Contribution margin = $2,842,000 - ($1,653,000 + $145,000) Contribution margin = $1,044,000 Unit contribution margin = Contribution margin Boxes of tiles Unit contribution margin = $1,044,000 580,000 Unit contribution margin = $1.8 b. Calculate the company's unit contribution ratio Contribution margin ratio = Contribution margin Sales Contribution margin ratio = $1,044,000
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Unformatted text preview: $2,842,000 Contribution margin ratio = 36.74% (rounded) c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be? Contribution margin = Sales - Variable expenses Contribution margin = $2,132,000 - ($650,000 + $260,000) Contribution margin = $1,222,000 Unit contribution margin = Contribution margin Boxes of tiles Unit contribution margin = $1,222,000 520,000 Unit contribution margin = $2.35 Increase in sales units = 580,000 x 5% = 29,000 units Increase in net operating income = Unit contribution margin x Increase in sales units = $1.8 x 29,000 = $52,200 New net operating income = Current net operating income + Increase = $132,000 + $52,200 = $184,200...
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This note was uploaded on 04/19/2011 for the course ACC 505 taught by Professor Doe during the Spring '10 term at Keller Graduate School of Management.

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Course Hero - $2,842,000 Contribution margin ratio = 36.74%...

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