Reference no: EM132598059

Question 1. A company sells small motors as a component part to automobiles. The Model 101 motor sells for $850 and has per-unit variable costs of $400 associated with its production. The company has fixed expenses of $90,000 per month. In August, the company sold 425 of the Model 101 motors.

a. Calculate the contribution margin per unit for the Model 101.

b. Calculate the contribution margin ratio of the Model 101.

c. Prepare a contribution margin income statement for the month of August.

Question 2. A company manufactures and sells racing bicycles to specialty retailers. The Bomber model sells for $450 and has per-unit variable costs of $200 associated with its production. The company has fixed expenses of $40,000 per month. In May, the company sold 225 of the Bomber model bikes.

a. Calculate the contribution margin per unit for the Bomber.

b. Calculate the contribution margin ratio of the Bomber.

c. Prepare a contribution margin income statement for the month of May.

Question 3. Fill in the missing amounts for the four companies. Each case is independent of the others. Assume that only one product is being sold by each company.

Question 4. Markham Farms reports the following contribution margin income statement for the month of August. The company has the opportunity to purchase new machinery that will reduce its variable cost per unit by $2 but will increase fixed costs by 15%. Prepare a projected contribution margin income statement for Markham Farms assuming it purchases the new equipment. Assume sales level remains unchanged.