Question

In: Accounting

If sales are $812,000, variable costs are 60% of sales, and operating income is $200,000, what...

If sales are $812,000, variable costs are 60% of sales, and operating income is $200,000, what is the contribution margin ratio?

a.44% b.56% c.40% d.60%

Solutions

Expert Solution

Solution:
CALCULATION OF THE CONTRIBUTION
Particulars Amount
Sales $           8,12,000
Less: Variable Cost (60% of $ 812,000) $           4,87,200
Contribution $           3,24,800
Contribution Margin Ratio = (Contribution / Sales ) X 100
Contribution Margin Ratio =
Contribution= $           3,24,800
Divide By "/" By
Sales $           8,12,000
Equal to                        0.40
Multiply By "X" By 100
Equal to 40%
Answer = Option C = 40%

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