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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)