Question

The selling price for the handmade sweater sold at the village boutique is $80. the cost of the materials and labour used to make the sweater are $28.25. the store's owner pays $500 a month in rent and has other monthly fixed costs that average $175. calculate its percent contribution margin.

a. 15.9 percent
b. 62.3 percent
c. 42.5 percent
d. 64.7 percent

Answer 1

To calculate the percent contribution margin, subtract the total variable costs from the selling price and divide the result by the selling price. The correct answer is 64.7 percent (d).

Step-by-step explanation:

To calculate the percent contribution margin, we need to subtract the total variable costs from the selling price and divide the result by the selling price. The total variable costs include the cost of materials and labor used to make the sweater. First, let's calculate the total variable costs:

Total Variable Costs = Cost of Materials + Cost of Labor = $28.25

Next, let's calculate the contribution margin:

Contribution Margin = (Selling Price - Total Variable Costs) / Selling Price = ($80 - $28.25) / $80 = 0.645625

Finally, let's convert the contribution margin to a percentage:

Percent Contribution Margin = Contribution Margin * 100 = 0.645625 * 100 = 64.5625%

Therefore, the correct answer is 64.7 percent (d).