Exercise 6-6 Examining Cost Behaviour and Contribution Margin (LO1 - CC1, 3; LO2

Question

Exercise 6-6 Examining Cost Behaviour and Contribution Margin (LO1 - CC1, 3; LO2-CC7; LO3 - CC12) Bikes Manufacturing produces and sells children's bikes at an average price of $60. Its costs are as follows: direct materials, $15, direct labour, $8; variable overhead, $4; sales commission, 5% of price. Its fixed monthly costs are $44,000. Required 1. Using the above cost data, set up a monthly cost equation. 2. What is the company's contribution margin percentage? (Round your answer to 2 decimal places.) Contribution margin

Explanation / Answer

1) Cost equation :

2) Contribution margin ratio = (60-30)*100/60 = 50%

Y = a + b x Y = 44000 + 30 X

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