Question

A cement manufacturer has supplied the following data: Tons of cement produced and sold 310,000 Sales revenue $1,014,000 Variable manufacturing expense $239,000 Fixed manufacturing expense $334,000 Variable selling and administrative expense $186,880 Fixed selling and administrative expense $100,000 Net operating income $154,120 The company's contribution margin ratio is closest to:____________

Answer 1

Contribution margin ratio= 0.58= 58%

Step-by-step explanation:

Giving the following information:

Tons of cement produced and sold 310,000

Sales revenue $1,014,000

Variable manufacturing expense $239,000

Fixed manufacturing expense $334,000

Variable selling and administrative expense $186,880

Fixed selling and administrative expense $100,000

First, we need to calculate the unitary selling price, unitary variable cost, and total fixed costs.

Selling price= 1,014,000/310,000= $3.271

Unitary variable cost= (239,000 + 186,880)/310,000= $1.374

Total fixed costs= (334,000 + 100,000)= $434,000

Now, using the following formula, we can calculate the contribution margin ratio:

Contribution margin ratio= [(selling price - unitary variable cost)/ selling price]

Contribution margin ratio= [(3.271 - 1.374)/3.271]

Contribution margin ratio= 0.58= 58%