Question

Gifts Galore sold 189,000 worth of wrapping paper last year. The total contribution margin was100,170. Calculate the contribution margin ratio.

Answer 1

To calculate the contribution margin ratio for Gifts Galore, divide the total contribution margin of $100,170 by the total sales revenue of $189,000, resulting in a contribution margin ratio of 53%.

Step-by-step explanation:

To calculate the contribution margin ratio, we divide the total contribution margin by the total sales revenue. Gifts Galore sold $189,000 worth of wrapping paper last year and the total contribution margin was $100,170. The contribution margin ratio can be calculated as follows:

Contribution Margin Ratio = Total Contribution Margin / Total Sales Revenue

Contribution Margin Ratio = $100,170 / $189,000

Contribution Margin Ratio = 0.53 or 53%

Thus, for every dollar of sales revenue, Gifts Galore contributes 53 cents to covering its fixed costs and profit.