Question

A manufacturer of cedar shingles has supplied the following data: Bundles of cedar shakes produced and sold 257,000 Sales revenue $ 2,081,700 Variable manufacturing expense $ 974,700 Fixed manufacturing expense $ 503,000 Variable selling and administrative expense $ 259,700 Fixed selling and administrative expense $ 289,000 Net operating income $ 55,300 The company's contribution margin ratio is closest to: (Do not round intermediate calculations. Round your answer to whole percentage.) 59% 68% 32% 41%

Answer 1

Answer:

The correct answer is D: 41%

Explanation:

Giving the following information:

Bundles of cedar shakes produced and sold 257,000

Sales revenue $ 2,081,700

Variable manufacturing expense $ 974,700

Fixed manufacturing expense $ 503,000

Variable selling and administrative expense $ 259,700

Fixed selling and administrative expense $ 289,000

Contribution margin ratio= (selling price - unitary variable cost) / selling

price

Selling price= sales / units sold= 2081700/257000= $8.1

Total variable cost= Variable manufacturing expense + Variable selling and administrative expense= 974,700  + 259,700= $1,234,400

Unitary variable cost= 1,234,400/257000= 4.80

Contribution margin ratio= (8.1 - 4.80)/8.1= 0.407= 40.7%=41%