1 answer

Kenneth Clark recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes...

Question:

Kenneth Clark recently fulfilled his long-time dream of opening a gym that offers spinning exercise classes for $10 per person. To differentiate his gym and better serve his clients, Kenneth provides a towel, a bottle of water, and an after-workout protein shake to each person participating in a class, at a cost of $1.91 per person. Kenneth employs four part-time instructors and pays them each $2,600 per month. He also pays himself a monthly salary of $7,100. Kenneth’s other monthly costs are $3,100 for rent, $2,050 for depreciation on his 34 bikes, and $1,800 in utilities and insurance.

(a) What is Kenneth’s contribution margin per unit? (Round answer to 2 decimal places, e.g. 52.75.)

Contribution margin $enter Contribution margin in dollars per unit per unit


(b) What is Kenneth’s contribution margin ratio? (Round answer to 2 decimal places, e.g. 52.75.)

Contribution margin ratio enter Contribution margin ratio in percentages %


(c) Prepare Kenneth’s monthly contribution format income statement. Assume that he teaches 5,600 clients. (Round per unit values to 2 decimal places, e.g. 52.75 and all other answers to 0 decimal places, e.g. 1,234.)


Answers

a) Selling price per unit (person) Less: Variable cost per unit (person) Contribution margin per unit (person) $10.00 $1.91 $

.

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