The contribution-margin ratio is defined as:
A)the difference between the selling price and the variable cost per unit.
B)fixed cost per unit divided by variable cost per unit.
C)variable cost per unit divided by the selling price.
D)unit contribution margin divided by the unit selling price.
E)unit contribution margin divided by fixed cost per unit.

Question

Quizplus · Accepted Answer

The contribution-margin ratio is calculated as the unit contribution margin divided by the unit selling price. This ratio provides useful information for decision-making related to pricing and sales volume. Option A is incorrect as it defines the unit contribution margin. Option B is incorrect as it combines fixed and variable costs, while the contribution-margin ratio only considers variable costs. Option C is incorrect as it does the inverse of the actual calculation of the contribution-margin ratio. Option E is incorrect as it combines fixed costs and unit contribution margin, while the ratio only considers the unit contribution margin.

The Contribution-Margin Ratio Is Defined As