Question

Young Company budgets sales of $112,900,000, fixed costs of $25,000,000, and variable costs of $66,611,000. What is the contribution margin ratio for Young Company

Answer 1

Answer:

41 percent

Explanation:

Given : Budgeted Sales $112,900,000

            Fixed Costs $25,000,000

            Variable Costs $66,611,000

Contribution margin =  Net Sales - Variable costs

                                  = $112,900,000 - $66,611,000

                                  = $ 46,289,000

Contribution Margin Ratio = $\frac{Contribution\ Margin}{Net\ Sales}$  = $\frac{46289000}{112900000}$ =  41%

Contribution margin ratio indicates the percentage of sales remaining so as to cover a firm's fixed expenses. It also represents how much percentage of sales is required to cover the variable costs.

It is also expressed as , 100 - Variable cost ratio (in percentage)