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A unit sells for $25 and carries a variable cost of $10. What is the contribution margin ratio?
A40%
B25%
C67%
D60%
Answer & Solution
Correct answer: D. 60%
1. The contribution margin ratio is contribution margin divided by sales.
2. Unit contribution margin is $25 minus $10, which is $15.
3. $15 divided by $25 gives 60%.
4. The same 60% results from total amounts, since $15,000 divided by $25,000 is also 60%.
_Source: Jonick, Principles of Managerial Accounting (UNG Press, CC BY-SA 4.0), section 5.2.1 Contribution Margin_
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