Zeke Company sells 24,000 units at $18 per unit. Variable costs are $10 per unit

Question

Zeke Company sells 24,000 units at $18 per unit. Variable costs are $10 per unit, and fixed costs are $10. The contribution margin ratio and the unit contribution margin are

2% and $18 per unit

2% and $10 per unit

44% and $8 per unit

44% and $18 per unit

A firm operated at 80% of capacity for the past year, during which fixed costs were $208,000, variable costs were 68% of sales, and sales were $988,000. Operating profit was

$86,528

$671,840

$316,160

$108,160

Spice Inc.'s unit selling price is $46, the unit variable costs are $33, fixed costs are $104,000, and current sales are 10,500 units. How much will operating income change if sales increase by 5,400 units?

$206,700 increase

$70,200 increase

$136,500 decrease

$136,500 increase

Explanation / Answer

1) Contribution margin per unit = 18-10 = 8 per unit

Contribution margin ratio = 8*100/18 = 44.44%

so answer is c) 44% and $8 per unit

2) Operating profit = Contribution margin-fixed cost

= (988000*32%)-208000

Operating profit = 108160

so answer is d) $108,160

3) Contribution margin per unit = 46-33 = 13 per unit

Operating income change = 5400*13 = 70200

so answer is b) $70,200 increase

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