Calculate the contribution margin ratio of a company with sales of $180,000 and operating income of $37,000.Variable costs of the company are 52% of sales.
A) 41%
B) 48%
C) 36%
D) 24%

Question

Quizplus · Accepted Answer

Contribution Margin = Sales - Variable Costs
Contribution Margin Ratio = Contribution Margin / Sales

Firstly, let's calculate the variable cost for the company:
Variable Costs = 52% x $180,000 = $93,600

Now, let's calculate the contribution margin:
Contribution Margin = $180,000 - $93,600 = $86,400

Next, let's calculate the contribution margin ratio:
Contribution Margin Ratio = $86,400 / $180,000 = 0.48 or 48%

Therefore, the answer is option B.

Calculate the Contribution Margin Ratio of a Company with Sales