Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total van- able expenses

Question:

Last month when Holiday Creations, Inc., sold 50,000 units, total sales were $200,000, total van- able expenses were $120,000, and fixed expenses were $65,000.

Required:

1. What is the company’s contribution margin (CM) ratio?

2. Estimate the change in the company’s net operating income if it were to increase its total sales by $1,000.

Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...