The following formula can be used to determine the contribution margin ratio:
A) after-tax profit divided by (1 - tax rate).
B) contribution margin per unit divided by selling price per unit.
C) selling price per unit less variable costs per unit.
D) fixed costs ($) divided by contribution margin per unit ($).

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated by dividing the contribution margin per unit by the selling price per unit. This ratio helps to determine the percentage of sales revenue that is available to cover fixed costs and contribute to profits. Option A is incorrect because it calculates the after-tax profit, which is not required to determine the contribution margin ratio. Option C calculates the gross profit per unit, while the contribution margin ratio includes only variable costs. Option D calculates the break-even point, not the contribution margin ratio.

The Following Formula Can Be Used to Determine the Contribution