Question

If a company had a contribution margin of $1,000,000 and a contribution margin ratio of 40%, total variable costs must have been

Answer 1

Answer:

$1,500,000

Explanation:

Data provided in the question:

contribution margin of the company = $1,000,000

Contribution margin ratio = 40%

Now,

The sales = (contribution margin) / (Contribution margin ratio)

thus,

Sales = $\frac{1,000,000}{0.40}$

or

sales = $2,500,000

Therefore,

Variable cost = Sales - Contribution margin

or

Variable cost = $2,500,000 - $1,000,000 = $1,500,000