Yerke Company makes jungle gyms and tree houses for children.For jungle gyms, the price is $120 and variable expenses are $90 per unit.For tree houses, the price is $200 and variable expenses are $100.Total fixed expenses are $253,750.Last year, Yerke sold 12,000 gyms and 4,000 tree houses.Now suppose that Yerke expects tree house demand to increase from 4,000 to 8,000 units.
-What is the new (combined, overall or package) contribution margin ratio (rounded to two decimal places)?

Question

Quizplus · Accepted Answer

The new sales mix is 3:2.A package with 3 gyms and 2 tree houses has contribution margin of $290 [($30 × 3) + ($100 × 2)].Thus, the contribution margin ratio is $290 / $760 or 38%.[$760 = (3 × $120) + (2 × $200)]

Yerke Company Makes Jungle Gyms and Tree Houses for Children