Last month when Holiday Creations, Inc., sold 36,000 units, total sales were $31
ID: 2434926 • Letter: L
Question
Last month when Holiday Creations, Inc., sold 36,000 units, total sales were $317,000, total variable expenses were $244,090, and fixed expenses were $38,300.Requirement 1:
What is the company's contribution margin (CM) ratio? (Round your final answer to the nearest whole percentage. Omit the "%" sign in your response.)
Contribution margin ratio %
Requirement 2:
Estimate the change in the company's net operating income if it were to increase its total sales by $2,000. (Round your final answer to the nearest whole dollar amount. Omit the "$" sign in your response.).
Estimated change in net operating income $
Explanation / Answer
Requirement 1: What is the company's contribution margin (CM) ratio? (Round your final answer to the nearest whole percentage. Omit the "%" sign in your response.) Total sales = $317,000 Total variable cost = $244,090 Total contribution = $72,910 Contribution Margin ratio = Contribution ÷ Sales = 72,910 ÷ 317,000 Contribution margin ratio % = 23 Requirement 2: Estimate the change in the company's net operating income if it were to increase its total sales by $2,000. (Round your final answer to the nearest whole dollar amount. Omit the "$" sign in your response.). Total sales increase by $2,000 Contribution will increase by 23% = $460 Since there will be no change in fixed cost, and the same is already achived, Estimated change in net operating income $460 (increase)
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