Question

A cement manufacturer has supplied the following data: tons of cement produced and sold 295,000 sales revenue $ 999,000 variable manufacturing expense $ 236,000 fixed manufacturing expense $ 325,000 variable selling and administrative expense $ 153,610 fixed selling and administrative expense $ 97,000 net operating income $ 187,390 the company's contribution margin ratio is closest to:

Answer 1

The company's contribution margin ratio is calculated by dividing the contribution margin ($609,390) by the sales revenue ($999,000), resulting in a contribution margin ratio closest to 61.0%.

Step-by-step explanation:

The cement manufacturer's contribution margin ratio can be calculated using sales revenue and variable costs. The contribution margin (CM) is calculated by subtracting the total variable costs (both manufacturing and selling & administrative expenses) from the sales revenue.

Contribution Margin = Sales Revenue - Total Variable Costs

In this case, total variable costs = variable manufacturing expense + variable selling and administrative expense = $236,000 + $153,610 = $389,610. Therefore, the contribution margin = $999,000 - $389,610 = $609,390.

To find the contribution margin ratio, we divide the contribution margin by the sales revenue:

Contribution Margin Ratio = Contribution Margin / Sales Revenue

Contribution Margin Ratio = $609,390 / $999,000 = 0.610 (or 61.0%)

Therefore, the company's contribution margin ratio is closest to 61.0%.