Question

Debella Corporation's contribution format income statement for July follows:

Sales	$	1,568,800
Variable expenses		943,400
Contribution margin		625,400
Fixed expenses		354,000
Net operating income	$	271,400

   

Debella has no beginning or ending inventories. They produced and sold 10,600 units during July.

Required:
a.	What is Debella's contribution margin ratio? (Enter as a percentage, rounded to 1 decimal place.)

    

b.	What is Debella's contribution margin per unit?

    

c.	What is Debella's break-even in units?

    

d.	If sales increase by 110 units, by how much should net operating income increase? (Omit the "$" sign in your response.)

    

e.	How many units would Debella have to sell to attain a target profit of $300,900?

    

Answer 1

	AMOUNT ($)	AMOUNT PER UNIT
Sales	1568800	148
Variable expenses	943400	89
Contribution margin	625400	59
Fixed expenses	354000	33.39622642
Net operating income	2,71,400
contribution margin ratio	Contribution margin / Sales * 100
	59 / 148 * 100
	39.9%
contribution margin per unit	sales - variable expense
	148 - 89
	59
break-even in units	Fixed Cost / Contribution Margin per unit
	271400 / 59
	4600 units
If sales increase by 110 units operating income will increase by amount of contribution	Number of Units * contribution margin per unit
	110 * 59
	6490
Break Even to attain a target profit of $300,900	(Fixed cost + target profit) / contribution margin per unit
	(271400 + 300900) / 59
	9700 units