Metric 4: Contribution Margin
1. Dillon Company produces a product that sells for $120. A selling
commission of 10% of the selling price is paid on each unit sold. Variable
manufacturing costs are $60 per unit. Fixed manufacturing costs are $20 per
unit based on the current level of activity, and fixed selling and administrative
costs are $16 per unit. The contribution margin per unit is: $48a. Total
variable costs = 60 + 0.1 * 120 = 72b. CM ($) = price - variable costs = 120 - 72
=$48
2. A company with monthly revenue of $110,000, variable costs of $45,000,
and fixed operating costs of $35,000 has a contribution margin of: $65,000a.
CM ($) = revenue - variable costs = 110,000 - 45,000
=$65,000
3. It costs a vendor $1.00 each time s/he sells a hot dog to a customer. If the
price of the hot dog is $3.00 what is the contribution margin percentage:
66.7%a. CM% = (price - cost) / price = (3 - 1) / 3
=66.7%
4. Using the information from Metric 4 Case 4, the contribution margin per
unit for product DSK 4143 is (see the "instructions for metric mastery
quizzes" pdf in the content section on D2L FOR Metric 4 Case 4 info): $54.00a.
CM ($) = price - variable costs = 135 - 81
=$54
5. The following is Aykroyd Corporation's contribution format income
statement for last month:
Sales $4,000,000
Less variable expenses $2,800,000
Contribution margin $1,200,000
Less fixed expenses $720,000
Net income $480,000
