Question

Kite Corporation has provided the following contribution format income statement. Assume that the following information is within the relevant range.
Sales (3,000 units) $ 180,000
Variable expenses 108,000
Contribution margin 72,000
Fixed expenses 62,400
Net operating income $ 9,600
The contribution margin ratio is closest to:______.
a. 33%
b. 40%
c. 60%
d. 67%

Answer 1

Answer:

b. 40%

Explanation:

Contribution margin ratio = Contribution / Sales x 100

where,

Contribution = Sales - Variable Costs

                     =  $180,000 - 108,000

                     =  $72,000

therefore,

Contribution margin ratio = $72,000/ $180,000 x 100

                                          = 40 %

thus,

The contribution margin ratio is closest to 40 %.