Question

Coffee Klatch is an espresso stand in a downtown office building. The average selling price of a cup of coffee is $1.49 and the averagevariable expense per cup is $0.36. The average fixed expense per month in $1,300. An average of 2,100 cups are sold each month. What is the Cm Ratio for Coffee Klatch a. 1.319 b. 0.758 c. 0.242 d. 4.139

Answer 1

The Cm Ratio for Coffee Klatch is b. 0.758

Step-by-step explanation:

The contribution margin ratio is calculated by using following formula:

Contribution margin ratio = (Sales - Total Variable cost)/Sales

The average selling price of a cup of coffee is $1.49 and the average variable expense per cup is $0.36. An average of 2,100 cups are sold each month.

Total sales = $1.49 x 2,100 = $3,129

Total Variable cost = $0.36 x 2,100 = $756

Contribution margin ratio = ($3,129 - $756)/$3,129 = 0.758