The contribution margin ratio of Yoshi enterprises is 60%. If total fixed costs are $200,000, then what is the cost of producing and selling $1,000,000 of Yoshi's product?

Question

Quizplus · Accepted Answer

The cost of producing and selling $1,000,000 of Yoshi's product can be calculated by subtracting the contribution margin from the total sales. With a contribution margin ratio of 60%, the contribution on $1,000,000 sales is $600,000 (60% of $1,000,000). This means the cost of producing and selling the product is $400,000 ($1,000,000 - $600,000). However, since the question asks for the cost, and $600,000 represents the contribution (not the cost), the correct interpretation is that $400,000 is the contribution margin, implying the costs are $600,000.

The Contribution Margin Ratio of Yoshi Enterprises Is 60