Question

A jeans maker is designing a new line of jeans called Slims. The jeans will sell for $205 per pair and cost $164 per pair in variable costs to make.(1) Compute the contribution margin per pair.(2) Compute the contribution margin ratio.

Answer 1

Answer:

Results are below.

Explanation:

Giving the following information:

The jeans will sell for $205 per pair and cost $164 per pair in variable costs to make.

The contribution margin per unit is calculated using the selling price per unit and the unitary variable cost:

Unitary contribution margin= 205 - 164= $41

Now, to calculate the contribution margin ratio, we need to use the following formula:

contribution margin ratio= contribution margin/selling price

contribution margin ratio= 41/205

contribution margin ratio= 0.2