Question

EA3.

LO 3.1A product has a sales price of $150 and a per-unit contribution margin of $50. What is the contribution margin ratio?

Answer 1

Total contribution margin (CM) is calculated by subtracting total variable costs TVC from total sales TSP. Contribution margin per unit equals sales price per unit SP minus variable costs per unit VC . It is used in calculating a break even point of a business. Contribution margin ratio tells us how much contribution towards fixed cost is generate by selling a unit.

CM ratio = $ 50/ $ 150 *100= 33.33%

(Variable cost = 150 -50 = 100 )