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PB1.
LO 3.1A company sells mulch by the cubic yard. Grade A much sells for $150 per cubic yard and has variable costs of $65 per cubic yard. The company has fixed expenses of $15,000 per month. In August, the company sold 240 cubic yards of Grade A mulch.

Calculate the contribution margin per unit for Grade A mulch.
Calculate the contribution margin ratio of the Grade A mulch.
Prepare a contribution margin income statement for the month of August.

Respuesta :

Answer:

Contribution margin per unit = $85 per cubic yard

Contribution margin ratio = 56.67%

Explanation:

The computations are calculated below:

Contribution margin per unit = Selling price per cubic yard - variable cost  cubic yard

= $150 - $65

= $85 per cubic yard

Contribution margin ratio would be

= (Contribution margin per cubic yard) ÷ (Selling price per cubic yard) × 100

= ($85) ÷ ($150) × 100

= 56.67%

And, The statement of contribution margin income for the month of August is shown below:

Sales (240 cubic yards × $150)                          $36,000

Less: Variable cost (240 cubic yards × $65)    ($15,600)  

Contribution margin                                           $20,400

Less: Fixed expenses per month                     ($15,000)  

Net income                                                         $5,400

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