Green Acres Company provides home health care. Green Acres charges $35 per hour for professional care. Variable casts are $21 per hour and fixed costs are $78,000. Next year, Green Acres expects to charge out 12,000 hours of home health care.
-Refer to the Figure.What is the contribution margin ratio?
A)33%
B)40%
C)50%
D)60%

Question

Quizplus · Accepted Answer

Contribution margin ratio is calculated as contribution margin divided by total sales.

Contribution margin = sales revenue - variable costs
= ($35 per hour x 12,000 hours) - ($21 per hour x 12,000 hours)
= $420,000 - $252,000
= $168,000

Total sales = $35 per hour x 12,000 hours = $420,000

Contribution margin ratio = ($168,000 / $420,000) x 100%
= 40%

Therefore, the correct answer is C) 50%.

There is no best choice given in the question.

Green Acres Company Provides Home Health Care