The contribution margin ratio is equal to the contribution margin divided by sales, and shows the proportion of each sales dollar available to cover fixed costs and contribute to profit.

Question

Quizplus · Accepted Answer

This statement is true. The contribution margin ratio is calculated by dividing the contribution margin (which is sales revenue minus variable costs) by sales revenue. The resulting ratio represents the portion of each sales dollar that can be used to cover fixed costs and contribute to profits.

The Contribution Margin Ratio Is Equal to the Contribution Margin