What is the company's contribution margin ratio?

Question

Quizplus · Accepted Answer

Contribution margin ratio is the ratio of contribution margin to sales. It represents the amount of revenue that contributes towards covering fixed costs and generating profit. Since the ratio cannot exceed 100%, options C and D can be eliminated.  Option B is also eliminated because a contribution margin percentage of 70% would mean that the variable costs are very high, which is not a desirable scenario. Hence, the only viable option is A) 30%.

What Is the Company's Contribution Margin Ratio