Asked by Daylanie Flores on Jun 10, 2024
Verified
Ludington Corporation provides the following data from a recent period for its manufacture of shoes: direct material costs,$24,000; direct labor costs,$12,000; and total fixed costs,$40,000.Sales were $60,000 based on 12,000 units sold during the period.Calculate the contribution margin and the contribution margin ratio.
Contribution Margin
The amount by which sales revenue exceeds variable costs, representing the contribution towards covering fixed costs and generating profit.
Direct Material Costs
The expenditures for materials that are directly involved in the manufacturing process of a product.
Fixed Costs
Operating expenses that remain constant regardless of the business activity level, such as insurance or lease payments.
- Calculate and interpret the contribution margin and the contribution margin ratio.
Verified Answer
SA
Learning Objectives
- Calculate and interpret the contribution margin and the contribution margin ratio.