Young Company budgets sales of $112,900,000, fixed costs of $25,000,000, and variable costs of $66,611,000. What is the contribution margin ratio for Young Company? (Enter your answer as a whole number.) % b. If the contribution margin ratio for Martinez Company is 40%, sales were $34,800,000, and fixed costs were $1,500,000, what is the income from operations?

Contribution margin also called dollar contribution per unit. It is computed as the selling price per unit minus the variable cost per unit.

Here, “Contribution” stand for the component part of sales revenue that is not use up by variable costs and so modifies to the coverage of fixed costs.

(a). Computation of contribution Margin:

According to the given information,

Sales = $112,900,000.

Fixed Costs = $25,000,000.

Variable costs = $66,611,000.

Then, The contribution margin will be:

First, find the Sales-variable costs:

[tex]\text{Sales-Variable Cost}=\text{Sales-Variavle Cost}\\\\\text{Sales-Variable Cost}=\$112,900,000-\$66,611,000\\\\\text{Sales-Variable Cost}=\$46,289,000[/tex]

Then, the contribution margin ratio will be:

[tex]\text{Contribution Margin Ratio}= \dfrac{\text{Contribution margin}}{\text{sales}}\times 100\\\\\text{Contribution Margin Ratio}=\dfrac{\$46,289,000}{\$112,900,000}\times 100\\\\\text{Contribution Margin Ratio}=41\%[/tex]

(b). Computation of income from operations:

Now, if the contribution margin ratio is 40%.

Sales = $34,800,000.

Fixed Costs = $1,500,000.

Then, Income from operations will be:

[tex]\text{Income From Operations}=\text{Sales} \times \text{Contribution Margin Ratio}-\text{Fixed Cost}\\\\\text{Income From Operations}=\$34,800,000 \times 0.4-\$1,500,000\\\\\text{Income From Operations}=\$12,420,000[/tex]

Therefore, Income from operations is $12,4520,000.

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