Anthony Herrera recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes for

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Anthony Herrera recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes for $5 per person. To differentiate his gym and better serve his clients, Anthony provides a towel, a bottle of water, and an after-work-out protein shake to each person participating in a class, at a cost of $1.75 per person. Anthony employs three part-time instructors and pays them each $1,000 per month.
He also pays himself a monthly salary of $4,000. Anthony's other monthly costs are $1,500 for rent, $1,250 for depreciation on his 30 bikes, and $1,800 in utilities and insurance.
Required
a. What is Anthony's contribution margin per unit?
b. What is Anthony's contribution margin ratio?
c. Prepare Anthony's monthly contribution format income statement. Assume that he teaches 5,000 clients.
Contribution Margin
Contribution margin is an important element of cost volume profit analysis that managers carry out to assess the maximum number of units that are required to be at the breakeven point. Contribution margin is the profit before fixed cost and taxes...
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Managerial Accounting

ISBN: 978-1119343615

3rd edition

Authors: Charles E. Davis, Elizabeth Davis

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