What is meant by a product's contribution margin (CM) ratio?
A) The ratio of contribution margin to total sales revenue.
B) The ratio of sales to breakeven sales.
C) The ratio of contribution margin to net operating income.
D) The ratio of price minus variable cost per units.
E) The ratio that can be multiplied by percentage change in sales revenue to get percentage change in profit.

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated by dividing the contribution margin by total sales revenue. It shows the percentage of each sales dollar that contributes to covering fixed costs and generating profit.

What Is Meant by a Product's Contribution Margin (CM) Ratio