Question

A company has total sales of 1,430,000. Fixed expenses are 657,000 and the contribution margin ratio is 67. What is the contribution margin?

1) 67%
2) 67
3) 0.67
4) 670,000

Answer 1

The contribution margin can be calculated by subtracting the total fixed expenses from the total sales and then multiplying it by the contribution margin ratio.

Step-by-step explanation:

The contribution margin can be calculated by subtracting the total fixed expenses from the total sales and then multiplying it by the contribution margin ratio.

In this case, the contribution margin can be calculated as follows:

Contribution Margin = (Total Sales - Fixed Expenses) x Contribution Margin Ratio

= (1,430,000 - 657,000) x (67/100) = 773,000 x 0.67 = 517,910

Therefore, the contribution margin is $517,910. Option 4) 670,000 is incorrect as it is not the correct value.