Hollis Industries produces flash drives for computers which it sells for $20 each. Each flash drive costs $13 of variable costs to make. During April 1000 drives were sold. Fixed costs for March were $2 per unit for a total of $1000 for the month. How much is the contribution margin ratio?
A) 25%
B) 35%
C) 65%
D) 75%

Question

Quizplus · Accepted Answer

Contribution margin per unit = Selling price per unit - Variable cost per unit
Contribution margin per unit = $20 - $13 = $7

Contribution margin ratio = Contribution margin per unit / Selling price per unit
Contribution margin ratio = $7 / $20 = 0.35 or 35%

Hollis Industries Produces Flash Drives for Computers Which It Sells