Question

Contribution margin ratio can be calculated in all of the following ways except

a. 1 − Variable cost ratio.
b. contribution margin per unit / price.
c. fixed costs / Contribution margin per unit.
d. total contribution margin / Total sales.
e. All of these choices are correct.

Answer 1

The correct answer is e. All of these choices are correct.

Step-by-step explanation:

The correct answer is e. All of these choices are correct.

The contribution margin ratio can be calculated in all of the ways mentioned in the answer choices. Let's briefly explain each option:

1. Option a states that the contribution margin ratio can be calculated as 1 minus the variable cost ratio. The variable cost ratio is the proportion of variable costs to total sales. Subtracting this ratio from 1 gives us the contribution margin ratio.
2. Option b states that the contribution margin ratio can be calculated as the contribution margin per unit divided by the price per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit. This ratio represents the contribution margin as a proportion of the selling price.
3. Option c states that the contribution margin ratio can be calculated by dividing the fixed costs by the contribution margin per unit. The contribution margin per unit is the selling price per unit minus the variable cost per unit, and dividing it by the fixed costs gives us the contribution margin ratio.
4. Option d states that the contribution margin ratio can be calculated as the total contribution margin divided by the total sales. This ratio represents the contribution margin as a proportion of the total sales.
5. Option e correctly states that all of these choices are correct.