If sales total $1,000,000,fixed costs total $400,000,and variable costs are 55% of sales,the contribution margin ratio is 45%.

Question

Quizplus · Accepted Answer

Contribution margin ratio = 100% - variable cost percentage 
Variable cost percentage = 55% 
Contribution margin ratio = 100% - 55% = 45% 
Contribution margin = Sales - Variable cost = $1,000,000 - ($1,000,000 x 55%) = $450,000 
Contribution margin ratio = (Contribution margin / Sales) x 100 
= ($450,000 / $1,000,000) x 100 
= 45% 
Therefore, the statement is true.

If Sales Total $1,000,000,fixed Costs Total $400,000,and Variable Costs Are