Question

Hollis industries produces flash drives for computers, which it sells for $20 each. each flash drive costs $13 of variable costs to make. during april, 1000 drives were sold. fixed costs for march were $2 per unit for a total of $1000 for the month. how much is the contribution margin ratio?

Answer 1

Given:
Price = $20
Variable Cost = $13
Total number of items sold = 1000

Find: Contribution Margin Ratio

The formula for Contribution Margin Ration is:
(Sales - Variable Expenses)/Sales

Revenue = 20000
Variable Expenses = 13000
Contribution Margin = 7000

(20000-13000)/20000 = 0.35

Hollis Industries Contribution Margin Ratio is 35%