Asked by Mojarai Johnson on Jun 18, 2024
Verified
Boespflug Inc.has a $1,000,000 investment opportunity that involves sales of $900,000, fixed expenses of $225,000, and a contribution margin ratio of 30% of sales.The margin for this investment opportunity is closest to:
A) 5.0%
B) 25.0%
C) 75.0%
D) 30.0%
Contribution Margin Ratio
The percentage of sales revenue remaining after variable costs are subtracted, indicating how much contributes to covering fixed costs and generating profit.
Fixed Expenses
Costs that remain constant regardless of the level of production or business activity.
Sales
The total revenue generated from goods or services sold by a company during a specific period.
- Apply the concept of contribution margin ratio to evaluate investment opportunities.
- Understand and calculate the margin for investment opportunities.
Verified Answer
CM
Candice MiddletonJun 21, 2024
Final Answer :
A
Explanation :
Margin = Net operating income ÷ Sales = $45,000 ÷ $900,000 = 5.0%
Learning Objectives
- Apply the concept of contribution margin ratio to evaluate investment opportunities.
- Understand and calculate the margin for investment opportunities.