If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, the contribution margin ratio is

A) 38.0%
B) 26.8%
C) 11.8%
D) 62.0%

Question

If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, the contribution margin ratio isA) 38.0%B) 26.8%C) 11.8%D) 62.0%

Mirella Rodriguez · Accepted Answer

Final Answer : A, Explanation :  The contribution margin ratio is calculated as (Sales - Variable Costs) / Sales. Given that sales are $425,000 and variable costs are 62% of sales, the variable costs amount to $263,500 (62% of $425,000). Therefore, the contribution margin is $425,000 - $263,500 = $161,500. The contribution margin ratio is $161,500 / $425,000 = 38.0%.

If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, the contribution margin ratio is

A) 38.0%
B) 26.8%
C) 11.8%
D) 62.0%

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