Question

​Peeler's Smoothie Company has provided the following​ information: Sales price per unit $ 6.50 Variable cost per unit $ 2.00 Fixed costs per month $ 1 comma 000 Calculate the contribution margin ratio.​ (Round your answer to two decimal​ places.)

Answer 1

Answer:

Contribution margin ratio = 69.23%

Explanation:

We know,

Contribution margin ratio = (Contribution Margin per unit ÷ Sales per unit) × 100

Again, we know, Contribution margin per unit = Sales per unit - Variable cost per unit

Given,

Sales price per unit = $6.50

Variable cost per unit = $2.00

Therefore, Contribution margin per unit = $6.50 - $2.00 = $4.50

Putting the values into the above formula, we can get,

Contribution margin ratio = ($4.50 ÷ $6.50) × 100 = 69.23% (Rounded to two decimal places)