Please type out the answer. Thank you. Compute the contribution margin ratio bas
ID: 2430350 • Letter: P
Question
Please type out the answer. Thank you.
Compute the contribution margin ratio based on the following data:
Sales revenue
$1,500,000
Variable manufacturing cost
$675,000
Fixed manufacturing cost
$200,000
Variable selling and administrative expense
$120,000
Fixed selling and administrative expense
$135,000
Net operating income
$370,000
Sales revenue
$1,500,000
Variable manufacturing cost
$675,000
Fixed manufacturing cost
$200,000
Variable selling and administrative expense
$120,000
Fixed selling and administrative expense
$135,000
Net operating income
$370,000
Explanation / Answer
Answer
Contribution margin = Sales Revenue – All Variable costs
= 1500000 – 675000 (Variable manufacturing cost) – 120000(Variable selling & admin expenses)
= 1500000 – 675000 – 120000 = $ 705,000 = Contribution margin.
= ( $ 705,000 / $ 1,500,000) x 100
= 0.47 x 100
= 47% = Contribution margin ratio.