Question

Heidi C. sells golf putters specifically designed for petite women. The company's accountant prepared the following income statement for the company's most recent quarter.

Sales Revenue. $525,000
Cost of Goods Sold. $180,000
Variable Selling Expense 27,000
Variable General and Administrative Expenses18,750
Total Variable Expenses. 225,750
Contribution Margin. 299,250
Fixed Selling Expenses 51,000
Fixed General and Administrative Expenses96,000
Total Fixed Expenses. 147,000
Net Income. $152,250
What is the company's contribution margin ratio if each putter sells for $105?

a. 29%
b. 57%
c. 28%
d. 43%

Answer 1

The contribution margin ratio is calculated by dividing the contribution margin ($299,250) by sales revenue ($525,000) and multiplying by 100%, which equals b. 57%.

Step-by-step explanation:

To calculate the contribution margin ratio, divide the contribution margin by the sales revenue. The contribution margin is already provided in the income statement as $299,250. The sales revenue is $525,000. The formula for the contribution margin ratio is:

Contribution Margin Ratio = (Contribution Margin / Sales Revenue) × 100%

By plugging in the provided numbers, we get:

Contribution Margin Ratio = ($299,250 / $525,000) × 100%

Contribution Margin Ratio = 0.57 or 57%

Therefore, the correct answer is:

• b. 57%