How much does each additional sales dollar contribute toward profit for a firm with $5 million break-even level of revenues and $1.5 million in fixed costs including depreciation?
A) $0.30
B) $0.33
C) $0.50
D) $0.67

Question

Quizplus · Accepted Answer

Contribution margin = (Sales - Variable costs) / Sales= (Sales - $3.5 million) / Sales= 1 - $3.5 million / Sales= 1 - 0.7= 0.3Therefore, each additional sales dollar contributes $0.30 toward profit.

How Much Does Each Additional Sales Dollar Contribute Toward Profit