On Fire Company, a producer of salsa, has the following information: $$\begin{array} { l r }
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 5.00 \
\text { Variable cost per unit } & \$ 3.00 \
\text { Total fixed costs } & \$ 90,000.00
\end{array}$$ The contribution-margin ratio is _____.
A)30%
B)40%
C)60%
D)100%

Question

On Fire Company, a producer of salsa, has the following information: $$\begin{array} { l r } 
\text { Income tax rate } & 30 \% \
\text { Selling price per unit } & \$ 5.00 \
\text { Variable cost per unit } & \$ 3.00 \
\text { Total fixed costs } & \$ 90,000.00
\end{array}$$ The contribution-margin ratio is _____.
A)30%
B)40%
C)60%
D)100%

Quizplus · Accepted Answer

The contribution-margin ratio is calculated as (Selling Price per Unit - Variable Cost per Unit) / Selling Price per Unit. Here, it is ($5.00 - $3.00) / $5.00 = 0.40 or 40%.

On Fire Company, a Producer of Salsa, Has the Following