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Q24E

Expert-verified
Horngren'S Financial And Managerial Accounting
Found in: Page 1172

Short Answer

Using variable costing, service company Henry’s Helpers provides locksmith services. One type of service call is to evaluate private residences for security concerns and make recommendations for a safety plan. Use the data below to determine the company’s total contribution margin, contribution margin per service call, and contribution margin ratio when 220 service calls are made in the month of June.

Service Revenue $ 170 per service call

Variable Costs 68 per service call

Fixed Costs 21,040 per month

The contribution margin ratio of the companyis $60%

See the step by step solution

Step by Step Solution

Step 1: Calculation of total contribution margin and contribution margin per service call

Particulars

Total

Service revenue (220x170)

$37,400

Less: Variable cost (220x68)

$14,960

Contribution Margin

$22,440

Step 2: Calculation of total contribution margin ratio for the company

Contribution Margin Ratio = Contribution Margin / Service Revenue

=$22,440/$37,400

=60%

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