Asked by Hannah Crenshaw on Apr 28, 2024
Verified
The contribution margin ratio is the percent of each sales dollar that remains after deducting the unit variable cost.
Contribution Margin Ratio
A calculation that shows a company's ability to cover its variable costs with its sales revenue, often expressed as a percentage.
Unit Variable Cost
The cost associated with producing additional units which may include materials, labor, and other variable costs.
- Understand the concept of contribution margin and how it is calculated.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
True
Explanation :
The contribution margin ratio is calculated by dividing the contribution margin (sales minus variable costs) by total sales. It represents the percentage of each sales dollar that contributes towards covering fixed costs and generating profits.
Learning Objectives
- Understand the concept of contribution margin and how it is calculated.