Sales per period 1,000 units Selling price $40 per unit Variable manufacturing cost $12 per unit...

Sales per period 1,000 units

Selling price $40 per unit

Variable manufacturing cost $12 per unit

Selling expenses $5,100 plus 5% of selling price

Administrative expenses $3,000 plus 20% of selling price

note Note that some costs have variable components such as commissions on sales and shipping costs.

The contribution margin ratio would be: A) 70%. B) 45%. C) 75%. D) 55%.

Expert Solution

Variable cost = Variable manufacturing + Variable selling + Variable Administrative expenses
                        = $12 + (5% of $40) + (20% of $40)
                        = $12 + $2 + $8
                       = $22
Contribution Margin = Selling Price - Variable cost per unit
                               = $40 - $22
                               = $18
contribution margin ratio = Contribution Margin / Sales
                                       = $ 18 / 40
                                      = 45%
hence, (B) 45% is correct Answer

ekkarill92 answered 2 years ago

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