The data to the right pertain to the operating budget of a manufacturing company. Compute the following.
​(a) contribution margin
​(b) contribution rate
​(c)​ break-even point in sales dollars

Sales = $1220000
Fixed cost =$105000
Total variable cost =$634400
Total cost=$ 739400
Net income =$480600


We can solve the problem step by step using the provided data.

### Given:
- Sales: $ S = 1,220,000 $
- Fixed cost: $ FC = 105,000 $
- Total variable cost: $ TVC = 634,400 $
- Total cost: $ TC = 739,400 $
- Net income: $ NI = 480,600 $

### Step 1: Contribution Margin (CM)
The contribution margin is calculated by subtracting the total variable cost from sales:

\[
CM = S - TVC
\]

\[
CM = 1,220,000 - 634,400 = 585,600
\]

So, the **contribution margin** is $ 585,600 $.

### Step 2: Contribution Rate (CR)
The contribution rate (also known as the contribution margin ratio) is the contribution margin as a percentage of sales:

\[
CR = \frac{CM}{S}
\]

\[
CR = \frac{585,600}{1,220,000} \approx 0.48 \text{ or } 48\%
\]

So, the **contribution rate** is $ 48\% $.

### Step 3: Break-even Point in Sales Dollars (BE)
The break-even point in sales dollars is the point where the total sales cover both fixed and variable costs. It is calculated as:

\[
BE = \frac{FC}{CR}
\]

\[
BE = \frac{105,000}{0.48} \approx 218,750
\]

So, the **break-even point in sales dollars** is $ 218,750 $.

### Summary of Results:
- (a) Contribution margin: $ 585,600 $
- (b) Contribution rate: $ 48\% $
- (c) Break-even point in sales dollars: $ 218,750 $

Do you want further details or have any questions?

Here are 5 related questions to consider:
1. What would happen to the break-even point if the fixed costs increased?
2. How would an increase in the variable cost affect the contribution margin?
3. What is the formula for calculating the margin of safety based on the provided data?
4. How can the company use the contribution rate to plan future sales targets?
5. What role does the contribution margin play in profit planning?

**Tip:** Understanding the contribution margin helps identify how much each sale contributes toward covering fixed costs and generating profit.

The data to the right pertain to the operating budget of a manufacturing company. Compute the following.
(a) contribution margin
(b) contribution rate
(c) break-even point in sales dollars

Sales = $1220000
Fixed cost =$105000
Total variable cost =$634400
Total cost=$ 739400
Net income =$480600

Learn how to calculate the contribution margin, contribution rate, and break-even point in sales dollars for a manufacturing company. Given data includes sales of $1,220,000, fixed costs of $105,000, and total variable costs of $634,400. This problem covers key concepts in cost accounting and financial analysis, suitable for students in Grades 10-12.

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