If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, the contribution margin ratio is
A)38.0%
B)26.8%
C)11.8%
D)62.0%

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated as (Sales - Variable Costs) / Sales. Given that sales are $425,000 and variable costs are 62% of sales, the variable costs amount to $263,500 (62% of $425,000). Therefore, the contribution margin is $425,000 - $263,500 = $161,500. The contribution margin ratio is $161,500 / $425,000 = 38.0%.

If Sales Are $425,000, Variable Costs Are 62% of Sales