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Riker Corporation is a wholesaler that sells a single product. Management has provided the following cost data for two levels of monthly sales volume. The company sells the product for $149 per unit. Sales volume (units) 14,800 16,310 Cost of sales $1,272,800 $1,402,660 Selling and administrative costs $671,000 $698,180 Question: What will estimated contribution margin be if 15,800 units are sold?

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Answer:

Riker Corporation's Contribution Margin at 15,800 level of activity is                     $995,400 ($63 per unit) and Contribution Margin (%) is 42%    

Explanation:  

Contribution at Sales Volume of 15,800:  

Sales Revenue (15,800 × $149)                                   $2,354,200      

Cost of Sales (Working 1)                                             $(1,358,800)  

Contribution Margin                                                   $995,400  

Contribution Margin (per unit)                                       $63  

Contribution Margin (%)                                                42%  

 

Working 1

Sales Volume (Units)                        14,800                  16,310    

Cost of Sales ($)                               $1,272,800              $1,402,660    

Cost of Sales per unit                          $86                    $86  

(Cost of Sales ÷ Sales Volume)

*Figures in brackets represent negative figures

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