Question

If

sales are $802,000, variable costs are 65% of sales, and income
from operations is $267,000, what is the contribution margin ratio?
a. 35% b. 65% c. 61% d. 39%
please show calculations

Answer 1

a. 35%

Explanation:

Sales = $802,000

Variable costs = 65% of sales = 0.65 x $802,000 = $521,300

Income from operations = $267,000

Contribution Margin = Sales - Variable Costs

= $802,000 - $521,300 = $280,700

Contribution Margin Ratio = (Contribution Margin / Sales) x 100

= ($280,700 / $802,000) x 100

= 35%

Therefore, the contribution margin ratio is approximately 35.02%.