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What is the company contribution margin ratio

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Reference no: EM133044161

Question - This question is related to using Accounting and Financial information and Break-Even-Point (BEP) and Sales-Volume-Profit Analysis. By doing this exercise, you will be able to calculate profit (or loss) and use accounting and financial information to support management decisions for a small business.

Please suggest the solution/s to the following scenario:

Problem scenario: The following is Addition Corporation's contribution format, income statement for the last month:

Sales $1,000,000

Less Variable Expenses (700,000)

Contribution Margin 300,000

Less Fixed Expenses 180,000

Operating Income 120,000

The company has no beginning or ending inventories. A total of 20,000 units were produced and sold last month.

Required -

-What is the company's contribution margin ratio?

-What is the Break-even in units?

-If sales increase by 100 units, by how much should operating income increase?

-How many units would the company have to sell to attain target operating profit of $150,000?

-What is the company's margin of safety?

-What is the company's Degree of Operating Leverage (DOL)?

Reference no: EM133044161

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