Accounting: What the Numbers Mean 9th Edition by Wayne W McManus, Daniel F Viele, David H Marshall

Exercise 29

For the following questions, circle the best response. Answers are at the end of this chapter.

Seabold Interiors sold 18,400 yards of wallpaper last year at a contribution margin of $3.50 per yard and incurred $49,400 in total fixed costs. This year contribution margin per yard is expected to increase to $4, and fixed costs are expected to increase to $58,000. How many units must be sold this year to earn the same operating income as was earned last year? (Hint: Use the expanded contribution margin model described in this chapter.)

a. 16,900.

b. 17,500.

c. 18,250.

d. 20,200.

e. None of the above.

Step 1 of 2

Contribution is the excess of revenue earned over variable cost.

Last year’s contribution margin is calculated by

Last year’s operating income is calculated by