A tile manufacturer has supplied the following data: Boxes of tile produced and
ID: 2348347 • Letter: A
Question
A tile manufacturer has supplied the following data:Boxes of tile produced and sold 625,000
Sales revenue $2,975,000
Variable manufacturing expense $1,720,000
Fixed manufacturing expense $790,000
Variable selling and admin expense $152,000
Fixed selling and admin expense $133,000
Net operating income $180,000
Required:
a. Calculate the company's unit contribution margin.
b. Calculate the company's unit contribution ratio.
c. If the company increases its unit sales volume by 5% without increasing its fixed expenses, what would the company's net operating income be?
Explanation / Answer
Tile Manufacturer
Boxes of Tile Produced & Sold
625,000
Total
Unit
Ratio
Sales Revenue
$2,975,000
$4.76
1
Less:
Variable Manufacturing Expense
$1,720,000
$2.75
0.58
Variable Selling & Adm. Expense
$152,000
$0.24
0.05
Total Variable Expense
$1,872,000
$3.00
0.63
Contribution Margin
$1,103,000
$1.76
0.37
Less:
Fixed Manufacturing Expense
$790,000
Fixed Selling & Adm. Expense
$133,000
Total Fixed Expense
$923,000
Net Operating Income
$180,000
a) $1.76 per unit
b) 1.76 / 4.76 = 0.37
c) 180,000
Tile Manufacturer
Boxes of Tile Produced & Sold
625,000
Total
Unit
Ratio
Sales Revenue
$2,975,000
$4.76
1
Less:
Variable Manufacturing Expense
$1,720,000
$2.75
0.58
Variable Selling & Adm. Expense
$152,000
$0.24
0.05
Total Variable Expense
$1,872,000
$3.00
0.63
Contribution Margin
$1,103,000
$1.76
0.37
Less:
Fixed Manufacturing Expense
$790,000
Fixed Selling & Adm. Expense
$133,000
Total Fixed Expense
$923,000
Net Operating Income
$180,000
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