Contribution Margin Ratio
a. Bert Company budgets sales of $920,000, fixed costs of $58,000, and variable costs of $257,600. What is the contribution margin ratio for Bert Company? (Enter your answer as a whole number.)
b. If the contribution margin ratio for Ernie Company is 36%, sales were $834,000, and fixed costs were $207,170, what was the income from operations?
Contribution Margin and Contribution Margin Ratio
For a recent year, Wicker Company-owned restaurants had the following sales and expenses (in millions):
| Sales |
$36,300 |
| Food and packaging |
$10,823 |
| Payroll |
9,200 |
| Occupancy (rent, depreciation, etc.) |
9,887 |
| General, selling, and administrative expenses |
5,300 |
| |
$35,210 |
| Income from operations |
$1,090 |
Assume that the variable costs consist of food and packaging, payroll, and 40% of the general, selling, and administrative expenses.
a. What is Wicker Company's contribution margin? Round to the nearest million. (Give answer in millions of dollars.)
b. What is Wicker Company's contribution margin ratio? Round to one decimal place.
c. How much would income from operations increase if same-store sales increased by $2,200 million for the coming year, with no change in the contribution margin ratio or fixed costs? Round your answer to the closest million.
High-Low Method
Shatner Inc. has decided to use the high-low method to estimate the total cost and the fixed and variable cost components of the total cost. The data for various levels of production are as follows:
| Units Produced |
Total Costs |
| 6,090 |
$470,400 |
| 3,750 |
309,120 |
| 1,890 |
302,400 |
a. Determine the variable cost per unit and the total fixed cost.
b. Based on part (a), estimate the total cost for 2,870 units of production.