Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below:

-If 24,000 units are sold during the third quarter and this activity is within the relevant range, Bee Company's expected contribution margin would be

Question

Bee Company is a honey wholesaler. An income statement and other data for the second quarter of the year are given below:

-If 24,000 units are sold during the third quarter and this activity is within the relevant range, Bee Company's expected contribution margin would be

Quizplus · Accepted Answer

The contribution margin per unit is £30 (selling price per unit of £40 less variable cost per unit of £10). Therefore, the expected contribution margin for 24,000 units is £30 x 24,000 = £720,000. However, the question states that this activity is within the relevant range, which means that fixed costs are not expected to change. Therefore, the expected contribution margin is £720,000 + £42,000 (fixed costs) = £762,000.

Bee Company Is a Honey Wholesaler