Question

Sheridan companyproduces flash drives for computers, which it sells for $20 each. each flash drive requires $16 of variable costs to make. during april, 1000 drives were sold. fixed costs for april were $1000. how much is the contribution margin ratio? 80% 10% 90% 20%

Answer 1

The contribution margin ratio is the difference between the company's sales and variable expenses give as a percentage.

Sales in April were: $20,000
Expenses in April were: $16,000 (variable costs) and $1,000 (fixed costs)

The company profited $3,000 in April.

Expenses/Sales = Contribution Margin Ratio
$16,000/$20,000 = 80%