Question

Contribution Margin

Review the contribution margin income statements for Cover-to-Cover Company and Biblio Files Company on their respective Income Statements. Complete the following table from the data provided on the income statements. Each company sold 83,800 units during the year.

	Cover-to-Cover Company	Biblio Files Company
Contribution margin ratio (percent)	fill in the blank	fill in the blank
Unit contribution margin	$fill in the blank	$fill in the blank
Break-even sales (units)	fill in the blank	fill in the blank
Break-even sales (dollars)	$fill in the blank	$fill in the blank

Income Statement - Cover-to-Cover

Cover-to-Cover Company Contribution Margin Income Statement For the Year Ended December 31, 20Y8
Sales		$419,000
Variable costs:
Manufacturing expense	$251,400
Selling expense	20,950
Administrative expense	62,850	(335,200)
Contribution margin		$83,800
Fixed costs:
Manufacturing expense	$5,000
Selling expense	4,000
Administrative expense	11,950	(20,950)
Operating income		$62,850

Biblio Files Company
Contribution Margin Income Statement
For the Year Ended December 31, 20Y8Sales$419,000 Variable costs:  Manufacturing expense$167,600  Selling expense16,760  Administrative expense67,040(251,400)  Contribution margin$167,600 Fixed costs:  Manufacturing expense$86,750  Selling expense8,000  Administrative expense10,000(104,750)Operating income$62,850

Answer 1

completion of following tables from data provided in on the income statement :

particular	cover-to-cover company	biblio files company
contribution margin ratio (%)	20%	40%
unit contribution margin	$1	$2
break even sales (units)	20950 units	52375 units
break even sales (dollars)	$104750	$261875

calculation of above from income statement of two companies as under :

partuclar	cover-to-cover company	biblio files company
1) contribution margin ratio (contribution x 100/sales)	$83800 x 100/$419000 = 20%	$167600 x 100/$419000 = 40%
2) unit contribution margin (total contribution/no. of units sold)	$83800/83800 = $1	$167600/83800 =$2
3) break even sales (units) (fixed costs/unit contribution margin)	$20950/$1 = 20950 units	$104750/$2 = 52375 units
4) break even sales (dollars) (fixed costs/contribution margin ratio)	$20950/20% = $104750	$104750/40% = $261875

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