Inke Rentandatu

25/08/2021
Accounting for Managers Assignment 2

Answer

1) Contribution Margin Income statement

Sales (20,000 units x $ 120) $ 2,400,000
(Less) Variable Costs (20,000 units x $90) $ 1,800,000
Contribution Margin (20,000 units x $30) $ 600,000
Fixed Costs $ 250,000
Income from operations $ 350,000

2) Contribution Margin Ratio

= Contributin Margin/sales
$600,000/$2,400,000 = 0.25 or 25%
Contribution margin units
= Sales price per unit - Variable cost per unit
$120-$90=$30

3) How much would income from operations change,

if Toussant's sales increased by 3,000 units
A) We can calculate unit contribution margin Increase in income
= 3,000 units x $30 = $90,000
B) Calculate using contribution margin ratio
Change in sales dollars (3,000 units X $120) = $360,000
Sales x contribution margin ratio = $360,000 X 25% = $90,000

Contribution margin income statement

Sales (23,000 units x $120) $ 2,760,000

(Less) Variable costs (23,000 units x $90) $ 2,070,000
Contribution Margin (23,000 units x $30) $ 690,000
Fixed Costs $ 250,000
Income from operations $ 440,000

$440,000 (new) - $350,000 (old) = $90,000