Question

Sassy Sensations, a local retailer of adult-themed novelties, sells Body Dew, a pheromone-enhanced after bath oil mist. The eight-ounce bottle costs Sassy Sensations $6.95. Sassy Sensations normally sells this bottle for $14.95. Committed fixed costs associated with the product are $2,750 for 2012. Sassy Sensations estimates it will spend $4,250 advertising the product this year. The profit objective for Body Dew is $28,400.

(d) According to the company’s website, Body Dew has been reduced 29.77% for the month of January.  For this month only, what is Body Dew’s CM (contribution margin) (%)?  (Show your answer to two decimal places.)

Answer 1

Solution:

Calculation of Contribution Margin (%) = (Selling Price per Bottle - Variable Cost per Bottle) / Selling price per bottle

                                                                      = ($14.95 - $ 6.95) / $14.95

                                                                      = $8 / $14.95

                                                                      = 53.51 %