Question

Assume fixed costs total $180,000 per month, the variable cost per unit is $70, and each unit sells for $160. What is the contribution margin ratio (rounded)?

Answer 1

56.25%

Step-by-step explanation:

The difference between a company’s sales and variable expenses which is expressed as a percentage is the contribution margin ratio.

Mathematically, contribution margin ratio is:

(Sales - variable cost)/sales

Using the values in the question:

(160 -70)/160 = 90/160 = 0.5625 = 56.25%