Figure 4-2. Pauley Company provides home health care.Pauley charges $35/hour for professional care.Variable costs are $21/hour and fixed costs are $78,000.Next year,Pauley expects to charge out 12,000 hours of home health care.
Refer to Figure 4-2.What is the contribution margin ratio?

Question

Quizplus · Accepted Answer

Contribution margin per hour = Revenue per hour - Variable cost per hour
Contribution margin per hour = $35 - $21 = $14
Contribution margin ratio = Contribution margin per hour / Revenue per hour
Contribution margin ratio = $14 / $35 = 0.4 or 40%