Learning Materials
Features
Discover
Chapter 20: Q20-9RQ (page 1119)
What is contribution margin?
Answer
When total variable cost is subtracted from sales revenue it results in contribution margin.
Over 30 million students worldwide already upgrade their learning with Vaia!
All the tools & learning materials you need for study success - in one app.
Get started for free
What is cost stickiness? Why do managers need to be aware of cost stickiness?
The Circle Clock Company sells a particular clock for \(25. The variable costs are \)13 per clock and the breakeven point is 250 clocks. The company expects to sell 300 clocks this year. If the company actually sells 400 clocks, what effect would the sale of additional 100 clocks have on operating income? Explain your answer.
Use the following information to complete Short Exercises S20-16 and S20-17.
Wild Waters Swim Park sells individual and family tickets. With a ticket, each person receives a meal, three beverages, and unlimited use of the swimming pools. Wild Waters has the following ticket prices and variable costs for 2018:
Individual Family Sales price per ticket \( 50 \) 150 Variable cost per ticket 35 140
Wild Waters expects to sell one individual ticket for every four family tickets. Wild Waters’s total fixed costs are $27,500.
S20-16 Calculating breakeven point for two products
Using the Wild Waters Swim Park information presented, do the following tasks.
Requirements
1. Compute the weighted-average contribution margin per ticket.
2. Calculate the total number of tickets Wild Waters must sell to break even.
3. Calculate the number of individual tickets and the number of family tickets the company must sell to break even.
Mi Tierra Driving School charges \(680 per student to prepare and administer written and driving tests. Variable costs of \)408 per student include trainers’ wages, study materials, and gasoline. Annual fixed costs of \(63,920 include the training facility and fleet of cars.
Requirements
1. For each of the following independent situations, calculate the contribution margin per unit and the breakeven point in units by first referring to the original data provided:
a. Breakeven point with no change in information.
b. Decrease sales price to \)544 per student.
c. Decrease variable costs to \(340 per student.
d. Decrease fixed costs to \)53,040.
2. Compare the impact of changes in the sales price, variable costs, and fixed costs on the contribution margin per unit and the breakeven point in units.
A furniture manufacturer specializes in wood tables. The tables sell for \(100 per unit and incur \)40 per unit in variable costs. The company has $6,000 in fixed costs per month.
6. Prepare a contribution margin income statement for one month if the company sells 200 tables.
7. What is the total contribution margin for the month when the company sells 200 tables?
8. What is the unit contribution margin?
9. What is the contribution margin ratio?
What do you think about this solution?
We value your feedback to improve our textbook solutions.
Explanations 
Textbooks 
Exams 
GCSE 
IGCSE 
AS 
A Level 
International A Level 
University Admissions Tests 
Flashcards 
Vaia AI 
Notes 
Study Plans 
Study Sets 
Find a job 
Find a degree 
Student Deals 
Magazine 
Mobile App