Question

Flannigan Company manufactures and sells a single product that sells for $650 per unit; variable costs are $338. Annual fixed costs are $960,000. Current sales volume is $4,320,000. Compute the contribution margin ratio.

Answer 1

Answer:

The contribution margin ratio is 0.48

Explanation:

The contribution margin ratio is calculated by using following formula:

Contribution margin ratio = (Sales - Total Variable cost)/Sales

Flannigan Company has current sales volume of $4,320,000

The number of products are sold = $4,320,000/$650

Total Variable cost = The number of products are sold x variable costs per unit = $4,320,000/$650 x $338 = $2,246,400

Contribution margin ratio = ($4,320,000 - $2,246,400)/$4,320,000 = 0.48