(a) Banner Company budgets sales of $480,000, fixed costs of$90,000 and variable

Question

(a) Banner Company budgets sales of $480,000, fixed costs of$90,000 and variable costs of $360,000. What is thecontribution margin ratio for Banner Company? (b) If the contribution margin ratio for Manville Company is32%, sales were $850,000 and fixed costs were $190,000, what wasthe income from operations? (a) Banner Company budgets sales of $480,000, fixed costs of$90,000 and variable costs of $360,000. What is thecontribution margin ratio for Banner Company? (b) If the contribution margin ratio for Manville Company is32%, sales were $850,000 and fixed costs were $190,000, what wasthe income from operations?

Explanation / Answer

a.

b

0.32

a.

contribution margin ratio  = (sales - variable cost) / sales       = ($480,000 -$360,000) / $480,000       = 25%

b

contribution margin ratio   = (sales - variable cost) / sales

0.32

      = ($ 850,000 - variable cost ) / $850,000 $272,000       = $850,000 - variable cost Variable cost       = $850,000 - $272,000 Variable cost       = $578,000 Income from operation: Sales $850,000 Variable cost (578,000) Contribution margin $272,000 Fixed cost (190,000) Income form operation $82,000

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