Question

A manufacturer of tiling grout has supplied the following data: Kilograms produced and sold 470,000 Sales revenue $ 1,840,000 Variable manufacturing expense $ 943,000 Fixed manufacturing expense $ 232,000 Variable selling and administrative expense $ 355,000 Fixed selling and administrative expense $ 198,000 Net operating income $ 112,000 The company's contribution margin ratio is closest to:

Answer 1

The company's contribution margin ratio is 29.46% OR 29%

Step-by-step explanation:

Variable manufacturing expense = $943,000

Variable selling and administrative expense = $355,000

Kilograms produced and sold = $470,000

Fixed selling and administrative expense = $198,000

Sales revenue = $1,840,000

Net operating income = $112,000

Total Variable expense = Variable manufacturing + Variable selling

Total Variable expense = $943,000 + $355,000

Total Variable expense = $1,298,000

Now,

Contribution margin = Sales revenue - Total Variable expense

Contribution margin = $1,840,000 - $1,298,000

Contribution margin = $542,000

Contribution Margin Ratio = Contribution Margin / Sales revenue

Contribution Margin Ratio = $542,000 / $1,840,000

Contribution Margin Ratio = 29.46% OR 29%