Butler Sales Company is a distributor that has an exclusive franchise to sell a particular product made by another company. Butler Sales Company”s income statements for the last two years are given below:
|
|
This Year |
Last Year |
|
Units sold |
200,000 |
160,000 |
|
Sales revenue |
$1,000,000 |
$800,000 |
|
Less cost of goods sold |
700,000 |
560,000 |
|
Gross margin |
300,000 |
240,000 |
|
Less operating expenses |
210,000 |
198,000 |
|
Net operating income |
$ 90,000 |
$ 42,000 |
Operating expenses are a mixture of fixed costs and variable and mixed costs that vary with respect to the number of units sold.
Required:
a. Estimate the company”s variable operating expenses per unit, and its total fixed operating expenses per year.
b. Compute the company”s contribution margin for this year.