Question

Paney Company makes calendars. Information on cost per unit is as follows:Direct materials $1.50Direct labor 1.20Variable overhead 0.90Variable marketing expense 0.40Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10.

What is the contribution margin ratio?
a. 50%b. 44%c. 60%d. 40%e. 36%

Answer 1

Answer:

Option C : Contribution Margin Ratio is 60%

Explanation:

Contribution Margin Ratio = (Contribution per Unit ÷ Selling Price per Unit)× 100

  where: Contribution per unit = Selling price per unit minus Variable Costs per unit

                                                      Per Unit

Selling Price                                   $10.00  

Less Variable Costs:  

 Direct Materials                          $(1.50)  

 Direct Labor                                  $(1.20)  

 Variable Overhead                  $(0.90)    

 Variable Marketing                   $0.40  

Contribution                                  $6.00  

Contribution Margin Ratio            $6.00 ÷$10.00 × 100 = 60%