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25 May, 01:44

PB1.

LO 3.1A company sells mulch by the cubic yard. Grade A much sells for $150 per cubic yard and has variable costs of $65 per cubic yard. The company has fixed expenses of $15,000 per month. In August, the company sold 240 cubic yards of Grade A mulch.

Calculate the contribution margin per unit for Grade A mulch.

Calculate the contribution margin ratio of the Grade A mulch.

Prepare a contribution margin income statement for the month of August.

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  1. 25 May, 05:11
    0
    Contribution margin per unit = $85 per cubic yard

    Contribution margin ratio = 56.67%

    Explanation:

    The computations are calculated below:

    Contribution margin per unit = Selling price per cubic yard - variable cost cubic yard

    = $150 - $65

    = $85 per cubic yard

    Contribution margin ratio would be

    = (Contribution margin per cubic yard) : (Selling price per cubic yard) * 100

    = ($85) : ($150) * 100

    = 56.67%

    And, The statement of contribution margin income for the month of August is shown below:

    Sales (240 cubic yards * $150) $36,000

    Less: Variable cost (240 cubic yards * $65) ($15,600)

    Contribution margin $20,400

    Less: Fixed expenses per month ($15,000)

    Net income $5,400
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