Paxton Corp has provided the following data concerning its operations last month:
$\begin{array} { | l | r | }
\hline \text { Sales } & \$ 400,000 \
\hline \text { Variable expenses } & \$ 250,000 \
\hline \text { Fixed expenses } & \$ 100,000 \
\hline
\end{array}$Paxton Corp is a retailing organization.

-What is the contribution margin ratio?
A) 12.5%.
B) 33.0%.
C) 25.0%.
D) 37.5%.

Question

Paxton Corp has provided the following data concerning its operations last month:
$\begin{array} { | l | r | } 
\hline \text { Sales } & \$ 400,000 \
\hline \text { Variable expenses } & \$ 250,000 \
\hline \text { Fixed expenses } & \$ 100,000 \
\hline
\end{array}$Paxton Corp is a retailing organization.

-What is the contribution margin ratio?
A) 12.5%.
B) 33.0%.
C) 25.0%.
D) 37.5%.

Quizplus · Accepted Answer

The contribution margin ratio is calculated as (Sales - Variable Expenses) / Sales. For Paxton Corp, this is (\$400,000 - \$250,000) / \$400,000 = \$150,000 / \$400,000 = 0.375 or 37.5%.

Paxton Corp Has Provided the Following Data Concerning Its Operations