Chilton, Inc. sold 11,300 units last year for $21 each. Variable costs per unit

Question

Chilton, Inc. sold 11,300 units last year for $21 each. Variable costs per unit were $2.00 for direct matenials $1.90 for direct labor, and $3.90 for variable overhead Fixed costs were $60,400 in manufacturing overhead and $40 600 in nonmanufacturing costs a·Whats the total contribution margin? (Round your intermediate calculations to 2 decimal places.) Total Contribution Margin b. What is the unit contribution margin? (Round your answer to 2 decimal places.) Unit Contribution Margin c. What s the contribution margin ratio? (Round your intermediate calculations and final answer to2 decimal places.) Contribution Margin Ratio d. If sales increase by 2,050 units, by how much will profits increase? (Round your intermediate calculation to 2 decimal places and final answer to the nearest dollar amount.) Profits Increase O Type here to search

Explanation / Answer

Answer

1. Total Contribution Margin : total sales - (Direct Material per unit + Direct Labour Per Unit + Variable overhead)*no of unit

= (11300*21)-(2+1.90+3.90)*11300= $ 149160

2. Contribution per unit = 149160/11300 = 13.2 $

3. Contribution Margin Ratio = [Contribution/sales] * 100 = [13.2/21]*100 = 62.86%

4. If Sales increases by 2050 unit then profit increase will equal to increase in contribution since fixed cost will remain unchanged so increase in profit will be 2050*13.2 = 27060 $

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