Asked by Abdul Rahman Aljajah on May 14, 2024
Verified
Bryce Co. sales are $914,000, variable costs are $498,130, and operating income is $196,000. What is the contribution margin ratio?
A) 52.2%
B) 28.4%
C) 54.5%
D) 45.5%
Contribution Margin Ratio
The ratio that represents what percentage of sales contributes to the covering of fixed costs, calculated by subtracting variable costs from sales revenue and dividing the result by sales revenue.
Operating Income
Earnings from a company's core business operations, excluding revenue and expenses from non-operating activities like investments.
Variable Costs
Costs that vary depending on a company’s level of activity.
- Utilize the notion of the contribution margin ratio to assess the performance of a business.
Verified Answer
AA
Aleesha ArmstrongMay 20, 2024
Final Answer :
D
Explanation :
The contribution margin ratio is calculated as (Sales - Variable Costs) / Sales. Here, it is ($914,000 - $498,130) / $914,000 = $415,870 / $914,000 = 0.455 or 45.5%.
Learning Objectives
- Utilize the notion of the contribution margin ratio to assess the performance of a business.