Question

Oslo Co prepared the following Contribution Format income statement based on sales volume of 1,000 units. (the relevant rage of production is 500 to 1500 units):

Sales 80,000
Var C 52,000
CM 28,000
Fixed 21,840
NOI 6,160

What is the CM Ratio?

Answer 1

The Contribution Margin Ratio for Oslo Co is calculated by dividing the Contribution Margin of $28,000 by the Sales of $80,000, giving a CM Ratio of 35%.

Step-by-step explanation:

The contribution margin ratio (CM Ratio) is calculated by dividing the Contribution Margin (CM) by the Sales. To find the CM, we subtract Variable Costs (Var C) from Sales. In the given question, Oslo Co's Contribution Margin can be computed by taking the Sales of $80,000 and subtracting the Variable Costs of $52,000. This results in a CM of $28,000.

Now to get the CM Ratio, we do the following calculation:

CM Ratio = CM / Sales
CM Ratio = $28,000 / $80,000
CM Ratio = 0.35 or 35%

Hence, the CM Ratio for Oslo Co based on the sales volume of 1,000 units is 35%.