Asked by Sydney Tuttle on Jun 10, 2024
Verified
If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, the contribution margin ratio is
A) 38.0%
B) 26.8%
C) 11.8%
D) 62.0%
Contribution Margin Ratio
A financial metric that shows the portion of sales revenue that is not consumed by variable costs and therefore contributes to covering fixed costs.
Operating Income
Operating income is the profit earned from a firm's normal business operations, excluding deductions of interest and taxes.
Variable Costs
Costs that vary directly with the level of production or business activity, such as materials and labor.
- Determine and grasp the relevance of the contribution margin and contribution margin ratio.
Verified Answer
Learning Objectives
- Determine and grasp the relevance of the contribution margin and contribution margin ratio.
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