Asked by Judie Alfaro on Jul 17, 2024
Verified
The contribution margin ratio of 40% means that 60 cents of each sales dollar is available to cover fixed costs and to produce a profit.
Contribution Margin Ratio
The percentage of sales revenue that exceeds variable costs, indicating how much revenue contributes to covering fixed costs and generating profit.
- Understand the function and composition of a cost-volume-profit (CVP) graph.
Verified Answer
BH
Breanna HinnantJul 17, 2024
Final Answer :
False
Explanation :
The contribution margin ratio of 40% means that 40 cents of each sales dollar is available to cover fixed costs and to produce a profit. The remaining 60 cents is the portion of the sales dollar that goes towards covering variable costs.
Learning Objectives
- Understand the function and composition of a cost-volume-profit (CVP) graph.