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Wayfair Co. Reported the following results from the sale of 5,500 tables in May: sales $300,000, variable costs $165,000, fixed costs $85,000, and net income $50,000. Assume that Wayfair increases the selling price of tables by 10% on June 1. How much is the new contribution margin ratio?.

Respuesta :

anthougo

Wayfair Co's new contribution margin ratio is 50%.

Data and Calculations:

Number of tables sold in May = 5,500

Sales revenue = $300,000

Selling price per table = $54.55 ($300,000/5,500)

Total variable costs  = $165,000

Variable cost per unit = $30.00 ($165,000/5,500)

New selling price per table in June = $60 ($54.55 x 1.1)

Contribution margin per table = $30 ($60 - $30)

Contribution margin ratio =50%  ($30/$60 x 100)

Thus, the new contribution margin ratio is 50%.

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