Refer data given below:
MARJOLEIN & CO.
Unit price $20
Variable cost per unit 6
Annual fixed costs 210,000
Calculate CM Ratio, Contribution margin and breakeven sales.
(3) Estimated sales increase $200,000
Calculate in increase in contribution margin and net operating income.
(4) Operating results last year:
Variable expenses 96,000
Contribution margin 224,000
Fixed expenses 210,000
Net operating income $14,000
(4b.) Expected sales increase next year 5%
Calculate degree of operating leverage and increase in net operating income.
(6) Units sold last year 20,000
Increase in sales commission per unit $1.50
Expected increase in sales 20%
Increase in advertising expense 24000
Calculate incremental Contribution Margin.
Please refer attached file for better clarity and template provided.
1. Variable Cost=$6
Contribution Margin=(Price-Variable Cost)=20-6=$14
CM Ratio=CM/Price =14/20=0.70
2. Fixed Costs=$210,000
Breakeven Sales=Fixed Cost/CM Ratio=210000/0.7=$300,000
3. Increase in Sales=$200,000
The solution describes the steps for calculating contribution margin, CM ratio, break even sales and degree of operating leverage. It also makes comparative contribution income statement.