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A Trek Cycles manufactures and sells bicycles to retailers. The X-1 model sells for $500 and has per-unit variable costs of $300 associated with its production. The company has fixed expenses of $30,000 per month. In May, the company sold 300 of the X-1 model bikes. Show your calculations for full credit. Calculate the contribution margin per unit for the Bomber. Calculate the contribution margin ratio of the Bomber. Prepare a contribution margin income statement for the month of May.

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Answer:

Instructions are below.

Explanation:

Giving the following information:

Selling price= $500

Unitary variable cost= $300

Fixed costs= $30,000

Units sold= 300

First, we need to calculate the contribution margin:

Contribution margin= 500 - 300= $200

Now, the contribution margin ratio:

Contribution margin ratio= contribution margin/selling price

Contribution margin ratio= 200/500= 0.4

Finally, the contribution margin income statement:

Sales= 500*300= 150,000

Total variable cost= 300*300= (90,000)

Contribution margin= 60,000

Fixed costs= (30,000)

Net operating income= 30,000

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