In: Accounting
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%
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% | ||