Asked by Sofia Mateeva on Jul 14, 2024
Verified
Ace Corporation's variable costs are equal to 43% of sales revenue. Their fixed costs per month are $600,000. Calculate the contribution rate.
A) 22%
B) 34%
C) 43%
D) 53%
E) 57%
Variable Costs
Costs that change in proportion with the level of activity or production volume of a company.
Contribution Rate
The contribution margin expressed as a percentage of the unit selling price.
- Evaluate and appreciate the relevance of the per-unit and aggregate contribution margins.
- Evaluate the financial consequences of adjustments in selling price and cost structures.
Verified Answer
PS
Piper SwainJul 18, 2024
Final Answer :
E
Explanation :
The contribution rate is calculated as 100% minus the variable cost percentage. Since the variable costs are 43% of sales, the contribution rate is 100% - 43% = 57%.
Learning Objectives
- Evaluate and appreciate the relevance of the per-unit and aggregate contribution margins.
- Evaluate the financial consequences of adjustments in selling price and cost structures.
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