When sales dollars are used as the measure of volume in the cost-volume-profit equation,the focus is on solving for total revenue required to break even or a target profit rather than total units.The contribution margin ratio is defined as which of the following?
A)total contribution margin divided by total sales.
B)unit contribution margin divided by unit sales price.
C)total contribution margin divided by total sales and unit contribution margin divided by unit sales price.
D)the sum of fixed costs plus target profits divided by unit sales price.

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated by dividing the total contribution margin by total sales or by dividing the unit contribution margin by unit sales price. Option C includes both of these definitions in the answer. Option A only includes the total contribution margin, while option B only includes the unit contribution margin. Option D is not related to finding the contribution margin ratio.

When Sales Dollars Are Used as the Measure of Volume