Question

If sales are $820,000, variable costs are 55% of sales, and operating income is $260,000, what is the contribution margin ratio?

Answer 1

Answer:

45%

Explanation:

Contribution margin ratio = Contribution margin / Sales

Where;

Contribution margin = Sales - Variable cost

= $820,000 - $451,000(55% of sales)

= $369,000

Contribution margin ratio = $369,000 / $820,000 × 100

= 45%