Answer:
a. Calculate the company's unit contribution margin
$2.1
b. Calculate the company's unit contribution ratio
0.5 or 50%
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?
$123,100
Explanation:
a.
Unit price = $924,000 / 220,000 = $4.2
-Variable cost per unit ($297,000 + 165,000 ) / 220,000 = $2.1
=Contribution margin per unit = $2.1
b.
Contribution ratio = Contribution / Sales
Contribution ratio = $2.1 / $4.2
Contribution ratio = 0.5 = 50%
c. If sale is Increased by 5%
Number of unit = 220,000 x 105% = 231,000 units
$
Sales ( $4.2 x 231,000) 970,200
-Variable cost (2.1 x 231,000) 485,100
=Gross Income 485,100
-Fixed Cost ( 280,000 + 82,000) 362,000
=Net operating Income 123,100
