## Contribution Margin Exercise

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1. Assume that a firm currently has sales or revenues of $100,000, variable costs of $60,000, fixed

costs of $30,000. Calculate the following:

Contribution margin

Contribution margin ratio

Net profit

Net profit ratio as percent of total sales

2. Using the above example, if revenues and variable expenses were to drop by 20%, what would the

following be?

Contribution margin

Contribution margin ratio

Net profit

Net profit ratio as percent of total sales

3. Assume that the senior leaders want to know the net profit from a product that has the following

sales, cost, and volume characteristics:

Selling price per case $ 15

Variable expenses per case $ 9

Fixed expenses $ 40,000

Sales volume (cases) 8,000 cases

Calculate the following:

Total sales

Total variable expenses

2

ORGL330: GWJ

Contribution margin per unit

Total contribution margin

Contribution margin ratio

Net profit (total)

Net profit ratio as percent of total sales

4. Grafton Metal Works of McDonough produces cast bronze valves on a 20-person assembly line that

operates 5 days a week, 12 hours daily. The company sold 50,000 units in 2020 at $50 per unit. The

variable costs per unit were $22.50. Fixed costs totaled $750,000. Calculate the following:

Total sales for 2020

Total cost for 2020

Total variable expenses

Contribution margin per unit

Total contribution margin

Contribution margin ratio

Net profit (total)