alleryStart learning →The contribution margin ratio tells you what percentage of the selling price exceeds:
AThe target profit level
BThe margin of safety
CTotal unit variable costs
DTotal annual fixed costs
Answer & Solution
Correct answer: C. Total unit variable costs
1. The ratio is defined from the same two figures as the margin itself.
2. Contribution margin is selling price minus total variable cost per unit.
3. The contribution margin ratio is the percentage of a unit's selling price.
4. It is the percentage that exceeds total unit variable costs.
_Source: OpenStax Principles of Accounting, Volume 2: Managerial Accounting (CC BY-NC-SA 4.0), Ch 3 'Cost-Volume-Profit Analysis'_
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