Question

(TCO C) A tile manufacturer has supplied the following data.

Tons of cement produced and sold	220,000
Sales revenue	$924,000
Variable manufacturing expense	$297,000
Fixed manufacturing expense	$280,000
Variable selling and admin expense	$165,000
Fixed selling and admin expense	$82,000
Net operating income	$100,000

Required:
Calculate the company's unit contribution margin.
Calculate the company's contribution margin ratio.
If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?

Answer 1

Working
	Sales revenue	$ 924,000.00
	Less: variable costs
	Variable manufacturing expense	$ 297,000.00
	Variable selling and admin expense	$ 165,000.00
	Total Variable Cost	$ 462,000.00
(A)	Contribution margin	$ 462,000.00
(B)	Units sold	220000
C=A/B	Contribution margin per Unit	$              2.10
	Contribution margin ratio (Contribution /Sales revenue)	50.00%

Requirement 1

Unit Contribution margin = $ 2.10

Requirement 2

Total Contribution margin= $ 462,000.00

Requirement 3

Net income after 5% increase in sales= $123,100

Income statement
Increase in sales by 5%
Sales revenue (924000+5%)	$   970,200.00
Less: variable costs
Variable manufacturing expense	$   311,850.00*
Variable selling and admin expense	$   173,250.00
Total Variable Cost	$   485,100.00
Contribution margin	$   485,100.00
Less: Fixed expenses
Fixed manufacturing expense	$   280,000.00**
Fixed selling and admin expense	$      82,000.00
Total Fixed Expenses	$   362,000.00
Net income	$   123,100.00

*Variable cost will increase in proportion to increase in sales revenue

**Fixed cost will remain same whatever the sales level is .