Dairy Days Ice Cream sells ice cream cones for $5 per customer. Variable costs are $2 per cone. Fixed costs are $2100 per month. What is Dairy Days' contribution margin ratio?

Question

Quizplus · Accepted Answer

Contribution Margin Ratio = Contribution Margin/Selling Price
Contribution Margin = Selling Price - Variable Cost
Contribution Margin = $5 - $2 = $3
Contribution Margin Ratio = $3/$5 = 0.6 or 60%

Dairy Days Ice Cream Sells Ice Cream Cones for $5