a. Bryan Company budgets sales of $1,800,000, fixed costs of $1,000,000, and variable costs of $1,080,000. What is the contribution margin ratio for Bryan Company? (Enter your answer as a whole number.)
%
b. If the contribution margin ratio for Carnegie Company is 32%, sales were $900,000, and fixed costs were $210,000, what was the income from operations?
$
a)
Sales =$ 1,800,000
Variable costs = 1,080,000
Contribution margin = $720,000
contribution margin ratio = 720000/1800000 = 40%
b) sales = $900,000
contribution margin ratio 32%
contribution margin = 288000
less fixed cost = 210000
Income from operation = $7800
Income from operation $78,000
a. The contribution margin ratio represents the proportion of each sales dollar that contributes towards covering fixed costs and generating profit. To calculate the contribution margin ratio for Bryan Company, we can use the following formula:
Contribution Margin Ratio = (Sales - Variable Costs) / Sales
Given that the sales are $1,800,000 and the variable costs are $1,080,000, we can plug these values into the formula:
Contribution Margin Ratio = (1,800,000 - 1,080,000) / 1,800,000
Contribution Margin Ratio = 720,000 / 1,800,000
Contribution Margin Ratio = 0.4
To convert this decimal into a whole number, we multiply it by 100 and add a percentage symbol:
Contribution Margin Ratio = 0.4 * 100 = 40%
Therefore, the contribution margin ratio for Bryan Company is 40%.
b. The income from operations, also known as operating income, can be calculated using the following formula:
Income from Operations = (Sales - Variable Costs) - Fixed Costs
Given that the sales are $900,000, the contribution margin ratio is 32%, and the fixed costs are $210,000, we can rearrange the formula:
(Sales - Variable Costs) = Contribution Margin Ratio * Sales
(Sales - Variable Costs) = 0.32 * $900,000
(Sales - Variable Costs) = $288,000
Now, we can calculate the income from operations:
Income from Operations = (Sales - Variable Costs) - Fixed Costs
Income from Operations = $288,000 - $210,000
Income from Operations = $78,000
Therefore, the income from operations for Carnegie Company is $78,000.