Question

Strobeck Quads sells 75 used four wheelers each month for $300 each. The variable cost per unit is $200, and Quad's fixed costs are $4,200 per month. What is the contribution margin ratio?

a. 50.0%
b. 20.0%
c. 66.47%
d. 33.3%

Answer 1

The contribution margin ratio is 33.3%.

Step-by-step explanation:

The contribution margin ratio is calculated by dividing the contribution margin by the selling price. The formula for contribution margin is:

Contribution margin = Selling price - Variable cost per unit

In this case, the selling price is $300 and the variable cost per unit is $200. Therefore, the contribution margin per unit is $100.

The contribution margin ratio can be calculated by dividing the contribution margin per unit by the selling price per unit and multiplying by 100. So:

Contribution margin ratio = (Contribution margin per unit / Selling price per unit) x 100

Plugging in the values, we get:

Contribution margin ratio = ($100 / $300) x 100 = 33.3%

Therefore, the answer is option d. 33.3%.