Question
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
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?
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