Last month when Holiday Creations, Inc., sold 36,000 units, total sales were $289,000, total variable expenses...

Last month when Holiday Creations, Inc., sold 36,000 units, total sales were $289,000, total variable expenses were $239,870, and fixed expenses were $36,500.

Required:
1.	What is the company’s contribution margin (CM) ratio?

2.	Estimate the change in the company’s net operating income if it were to increase its total sales by $1,700.

Expert Solution

1. 17%

2. $ 289

			Change
Sales	$ 289,000	$ 290,700	$ 1,700
Less - Variable Cost	$ (239,870)	$ (241,281)
Contribution	$ 49,130	$ 49,419	$ 289
Contribution Margin	17%	17%
Less - Fixed Cost	$ 36,500	$ 36,500
Net Income	$ 12,630	$ 12,919	$ 289

ekkarill92 answered 1 year ago

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