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Radda [10]
3 years ago
15

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $120 per unit. Variable expenses are $60.00 pe

r unit, and fixed expenses total $180,000 per year. Its operating results for last year were as follows:
Sales $ 3,240,000
Variable expenses 1,620,000
Contribution margin 1,620,000
Fixed expenses 180,000
Net operating income $ 1,440,000

What is the product's CM ratio?
Business
1 answer:
umka21 [38]3 years ago
7 0

Answer:

50%

Explanation:

Given: Selling price= $120 per unit.

          Variable cost= $60 per unit.

First computing contribution margin.

Contribution margin= Selling\ price\ per\ unit - variable\ cost\ per\ unit

⇒ Contribution margin= \$120 - \$ 60

∴ Contribution margin=  \$ 60

Now, calculating the contribution margin ratio.

Contribution margin ratio= \frac{Contribution\ margin}{selling\ price\ per\ unit}

⇒ Contribution margin ratio= \frac{\$ 60}{\$ 120} \times 100

∴ Contribution margin ratio= 50\%

Hence, the product´s contribution ratio is 50%.

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