CM SI Session

The CM income Statement focuses on cost behaviors...

• True

• False

What does Contribution Margin tell us?

• How many units to sell

• How much of the earnings contribute to fixed expenses

• Total Profit

• Whether a company is gaining or losing money

To calculate CM: subtract fixed expenses from total revenue.

• True

• False

How can you calculate total CM?

• Units sold x CM Ratio

• Variable Expense per Unit x # of Units

• Sales - Fixed Expenses

• Total Sales x CM Ratio

What is the formula for the breakeven point in sales revenue?

Colton Dry Cleaners has determined the following about its costs: Total variable expenses are $42,000, total fixed expenses are $30,000, and the sales revenue is $110,000. Determine the company’s current CM and operating income.

• 68,000; 30,000

• 42,000; 30,000

• 80,000; 38,000

• 68,000; 38,000

Socks Unlimited produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $1.20 per package. Each package sells for $2.00.

Compute the contribution margin per package.

Socks Unlimited produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $1.20 per package. Each package sells for $2.00.

Compute the contribution margin ratio.

Socks Unlimited produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $1.20 per package. Each package sells for $2.00.

Find the breakeven point in units

Socks Unlimited produces sports socks. The company has fixed expenses of $85,000 and variable expenses of $1.20 per package. Each package sells for $2.00.

Find the breakeven point in dollars