Problem Gross margin and Contribution Margin (15 marks)

A) Arthurs Plumbing reported the following:

Revenues $4,500

Variable manufacturing costs $900

Variable nonmanufacturing costs $810

Fixed manufacturing costs $630

Fixed nonmanufacturing costs $545

Required:

a. Compute contribution margin.

b. Compute contribution margin percentage

c. Compute gross margin.

d. Compute gross margin percentage.

e. Compute operating income.

B) Alex Miller, Inc., sells car batteries to service stations for an average of $30 each. The variable cost of each battery is $20 and monthly fixed manufacturing costs total $10,000. Other monthly fixed costs of the company total $8,000.

Required:

a. What is the breakeven point in batteries?

b. What is the margin of safety, assuming sales total $60,000?