Little Company has provided the following information: Selling price $55 per uni
ID: 2537401 • Letter: L
Question
Little Company has provided the following information:
Selling price
$55
per unit
Cost of goods sold (all variable)
$20
per unit
Variable selling expense
$10
per unit
Total fixed selling expense
$800,000
Variable administrative expense
$5
per unit
Total fixed administrative expense
$400,000
If Little Company produces 250,000 units,
Gross margin Blank 1.
Contribution margin Blank 2
Selling price
$55
per unit
Cost of goods sold (all variable)
$20
per unit
Variable selling expense
$10
per unit
Total fixed selling expense
$800,000
Variable administrative expense
$5
per unit
Total fixed administrative expense
$400,000
Explanation / Answer
gross margin = (Sales - cost of goods sold) / sales * 100
= (55 -20) /55 *100 = 63.64%
Contribution margin = (Sales - cost of goods sold - variable selling expense - variable administrative expense) / Sales * 100
= (55 - 20 - 10 - 5) /55 *100 = 36.36%
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