The selling price for the handmade sweater sold at the Village Boutique is $80. The cost of the materials and labour used to make the sweater are $28.25. The store's owner pays $500 a month in rent and has other monthly fixed costs that average $175. Calculate its percent contribution margin.

Question

Quizplus · Accepted Answer

The contribution margin is calculated as (Selling Price - Variable Costs) / Selling Price. Here, the variable cost is the cost of materials and labor, which is $28.25. So, the contribution margin is ($80 - $28.25) / $80 = 0.646875 or 64.68 percent.

The Selling Price for the Handmade Sweater Sold at the Village