Question

Paney Company makes calendars. Information on cost per unit is as follows:Direct materials $1.50Direct labor 1.20Variable overhead 0.90Variable marketing expense 0.40Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10.

What is the contribution margin ratio?
a. 50%b. 44%c. 60%d. 40%e. 36%

Answer 1

Option C : Contribution Margin Ratio is 60%

Step-by-step explanation:

Contribution Margin Ratio = (Contribution per Unit ÷ Selling Price per Unit)× 100

where: Contribution per unit = Selling price per unit minus Variable Costs per unit

Per Unit

Selling Price $10.00

Less Variable Costs:

Direct Materials $(1.50)

Direct Labor $(1.20)

Variable Overhead $(0.90)

Variable Marketing $0.40

Contribution $6.00

Contribution Margin Ratio $6.00 ÷$10.00 × 100 = 60%