M5-10 Calculating Unit Contribution Margin and Contribution Margin Ratio [LO 5-5

Question

M5-10 Calculating Unit Contribution Margin and Contribution Margin Ratio [LO 5-5 Shermi's Tan-O-Rama is a local tanning salon. ts regression output is as follows: ,551.41 3.17 X Variable 1 Suppose that the company charges $6.40 per tanning session Calculate the unit contribution margin Unit Contribution Margin - Calculate contribution margin ratio. (Round your contribution margin ratio percentage to two decimal places (i.e. .1234 should be entered as 12.34%.)) Contribution Margin Ratio Calculate the total contribution margin if the shop books 1,150 tanning sessions this month.(Round contribution margin per unit to 2 decimal places and final answer to the nearest whole dollar.) Total Contribution Margin

Explanation / Answer

1 Unit selling price-Unit variable cost = Unit contribution margin 6.40-3.17= $3.23 2 Unit contribution margin/Unit selling price = Contribution margin ratio 3.23/6.40= 50.47% 3 Unit contribution margin*Tanning sessions = Total contribution margin 3.23*1150= $3715

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