Data from Rannier Metals for 2014 is as follows: $\begin{array}{lr}
\text { Sales } & \$ 20 \text { per unit } \
\text { Variable cost of goods sold } & ? ? \
\text { Fixed manufacturing overhead } & \$ 85,000 \
\text { Variable selling \& admini strative costs } & ? ? \
\text { Fixed selling \& administrative costs } & \$ 150,000
\end{array}$ The company produced 145,000 units during the year and sold 130,000 units. Variable production costs per unit and fixed costs have remained constant all year. Net income for the year was $1,000,000. How much was the company's contribution margin?

Question

Quizplus · Accepted Answer

The contribution margin is calculated as Sales - Variable Costs. Given the net income and fixed costs, we can back-calculate the contribution margin. Total sales = 130,000 units * $20 = $2,600,000. Fixed costs = $85,000 + $150,000 = $235,000. Net income = $1,000,000. Therefore, Contribution Margin = Sales - Fixed Costs - Net Income = $2,600,000 - $235,000 - $1,000,000 = $1,365,000.

Data from Rannier Metals for 2014 Is as Follows The Company Produced 145,000 Units During the Year and Sold