Math Problem Statement

Wight Corporation has provided its contribution format income statement for June. The company produces and sells a single product.

Sales (5,600 units) $ 235,200 Variable expenses 112,000 Contribution margin 123,200 Fixed expenses 47,200 Net operating income $ 76,000 If the company sells 5,700 units, its total contribution margin should be closest to:

Note: Do not round intermediate calculations.

Group of answer choices

$123,200

$125,400

$127,400

$77,357

Solution

To calculate the contribution margin for 5,700 units, let's follow these steps:

Step 1: Calculate Contribution Margin per Unit

Given:

  • Total Contribution Margin = $123,200 (for 5,600 units)

Contribution Margin per Unit=123,2005,600=22per unit\text{Contribution Margin per Unit} = \frac{123,200}{5,600} = 22 \, \text{per unit}

Step 2: Calculate Contribution Margin for 5,700 Units

Now that we know the contribution margin per unit is $22, we can find the total contribution margin for 5,700 units:

Total Contribution Margin for 5,700 units=5,700×22=125,400\text{Total Contribution Margin for 5,700 units} = 5,700 \times 22 = 125,400

Final Answer:

The total contribution margin for 5,700 units is:

125,400\boxed{125,400}

So, the correct answer is:

$125,400


Do you have any further questions or need more details?
Here are 5 related questions to expand your understanding:

  1. What is the relationship between contribution margin and net operating income?
  2. How does an increase in fixed costs affect net operating income?
  3. What happens to the contribution margin if the selling price per unit increases?
  4. Can the contribution margin be negative, and what does that indicate?
  5. How is the break-even point affected by changes in variable expenses per unit?

Tip: Contribution margin helps determine how much of the sales revenue is available to cover fixed expenses and generate profits.

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Math Problem Analysis

Mathematical Concepts

Contribution Margin
Unit Analysis
Linear Relationships

Formulas

Contribution Margin per Unit = Total Contribution Margin / Number of Units
Total Contribution Margin = Contribution Margin per Unit * Number of Units

Theorems

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Suitable Grade Level

Undergraduate Business/Accounting