Keith Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $12 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for March were $2 per unit for a total of $1,000 for the month. How much is the contribution margin ratio?
A) 30%
B) 40%
C) 60%
D) 70%

Question

Quizplus · Accepted Answer

The contribution margin per unit is the selling price minus the variable cost, which is $20 - $12 = $8. The contribution margin ratio is the contribution margin per unit divided by the selling price, which is $8 / $20 = 0.40 or 40%.

Keith Company Produces Flash Drives for Computers, Which It Sells