Asked by Pavlog Pawluk on Jun 20, 2024
Verified
A manufacturer of tiling grout has supplied the following data: 
The company's contribution margin ratio is closest to:
A) 48.9%
B) 82.1%
C) 31.0%
D) 75.2%
Tiling Grout
A dense fluid which is used to fill gaps or used as reinforcement in existing structures between tiles during installation.
Contribution Margin Ratio
The proportion of revenue from each dollar of sales that goes towards covering fixed expenses and creating profit.
- Compute and elucidate the significance of the contribution margin ratio in the context of business activities.
Verified Answer
AE
Ashlie ElizabethJun 22, 2024
Final Answer :
C
Explanation :
To find the contribution margin ratio, we need to divide the contribution margin (sales - variable costs) by the sales.
Using the data provided:
Sales = $500,000
Variable Costs = $345,000
Contribution Margin = $155,000
Contribution Margin Ratio = (Contribution Margin / Sales) x 100%
= (155,000 / 500,000) x 100%
= 31.0%
Therefore, the closest contribution margin ratio for the company is 31.0%, which corresponds to answer choice C.
Using the data provided:
Sales = $500,000
Variable Costs = $345,000
Contribution Margin = $155,000
Contribution Margin Ratio = (Contribution Margin / Sales) x 100%
= (155,000 / 500,000) x 100%
= 31.0%
Therefore, the closest contribution margin ratio for the company is 31.0%, which corresponds to answer choice C.
Learning Objectives
- Compute and elucidate the significance of the contribution margin ratio in the context of business activities.