Contribution Margin Lanning Company sells 160,000 units at $45 per unit. Variabl

Question

Contribution Margin Lanning Company sells 160,000 units at $45 per unit. Variable costs are S27 per unit, and fixed costs are s975,000. Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations. a. Contribution margin ratio (Round to one decimal place.) b. Unit contribution margin c. Income from operations ] % 18 per unit Chack My Work a. Unit contribution margin divided by unit sales price equals contribution margin ratio b. Unit sales price minus unit variable costs equals unit contribution margin. c. Contribution margin minus fixed costs equals income from operations.

Explanation / Answer

a. Contribution margin ratio = (Selling price - Variable cost) / Selling price = ($45 - $27) / $45 = 40.0%

c. Income from operations = Sales - Variable costs - Fixed costs = ($45 × 160,000) - ($27 × 160,000) - $975,000 = $1,905,000

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