Select your language

Suggested languages for you:
Log In Start studying!
Answers without the blur. Just sign up for free and you're in → Illustration


Financial & Managerial Accounting
Found in: Page 868
Financial & Managerial Accounting

Financial & Managerial Accounting

Book edition 7th
Author(s) John J Wild, Ken W. Shaw, Barbara Chiappetta
Pages 1096 pages
ISBN 9781259726705

Short Answer

Refer to the information about Ramort Company in QS 19-5. If Ramort doubles its production to 40,000 units while sales remain at the current 20,000-unit level, by how much would the company’s contribution margin increase or decrease under variable costing?

The contribution margin of the company will decrease by $660,000.

See the step by step solution

Step by Step Solution

Step 1: Meaning of Contribution Margin

Contribution margin refers to the amount left with a business organization after recovering all the variable costs from its sales revenue. The contribution margin is computed by deducting variable expenses from revenues.

Step 2: Determination of increase or decrease in contribution margin


Amounts ($)

Sales (20000*60)


Less: Variable costs:

Direct material (40000*10)


Direct labor (40000*12)


Variable overhead (40000*3)


Variable selling and administration cost (40000*2)


Contribution margin


Most popular questions for Business-studies Textbooks


Want to see more solutions like these?

Sign up for free to discover our expert answers
Get Started - It’s free

Recommended explanations on Business-studies Textbooks

94% of StudySmarter users get better grades.

Sign up for free
94% of StudySmarter users get better grades.