Which of the following formulas is used to calculate the contribution margin ratio?
A) (Sales − Fixed costs) ÷ Sales.
B) (Sales − Cost of goods sold) ÷ Sales.
C) (Sales − Variable costs) ÷ Sales.
D) (Sales − Total costs) ÷ Sales.

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated by subtracting variable costs from sales and then dividing by sales. This ratio shows the percentage of each sales dollar that contributes to covering fixed costs and generating profit.

Which of the Following Formulas Is Used to Calculate the Contribution