Question

Kelley Company has provided the following information:

Sales price per unit $44 Variable cost per unit 18 Fixed costs per month $18,000
Calculate the contribution margin ratio. (Round your answer to two decimal places.)
A. 70.97%
B. 59.09%
C. 41.94%
D. 40.91%

Answer 1

The contribution margin ratio for Kelley Company is calculated by subtracting the variable cost per unit from the sales price per unit, and then dividing that number by the sales price per unit. This gives a contribution margin ratio of 59.09%.

Step-by-step explanation:

To calculate the contribution margin ratio, you need to know the sales price per unit and the variable cost per unit. The contribution margin per unit is the sales price per unit minus the variable cost per unit. To find the ratio, you divide the contribution margin per unit by the sales price per unit and then multiply by 100 to get a percentage.

Here is the calculation for Kelley Company:

• Contribution margin per unit = Sales price per unit - Variable cost per unit = $44 - $18 = $26
• Contribution margin ratio = (Contribution margin per unit / Sales price per unit) × 100 = ($26 / $44) × 100 = 0.5909 × 100 = 59.09%

Therefore, the correct answer is B. 59.09%.