Garcia Company provides the following information about its product: $$\begin{array} { | l | r |}
\hline \text { Targeted operating income } & \$ 50,000 \
\hline \text { Selling price per unit } & 6.00 \
\hline \text { Variable cost per unit } & 1.50 \
\hline \text { Total fixed costs } & 125,000 \
\hline
\end{array}$$ What is the contribution margin ratio?

Question

Garcia Company provides the following information about its product: $$\begin{array} { | l | r |} 
\hline \text { Targeted operating income } & \$ 50,000 \
\hline \text { Selling price per unit } & 6.00 \
\hline \text { Variable cost per unit } & 1.50 \
\hline \text { Total fixed costs } & 125,000 \
\hline
\end{array}$$ What is the contribution margin ratio?

Quizplus · Accepted Answer

The contribution margin per unit is the selling price per unit minus the variable cost per unit, which is $6.00 - $1.50 = $4.50. The contribution margin ratio is the contribution margin per unit divided by the selling price per unit, which is $4.50 / $6.00 = 0.75 or 75%.

Garcia Company Provides the Following Information About Its Product What Is the Contribution Margin Ratio? A) 75% B) 100

Garcia Company Provides the Following Information About Its Product What Is the Contribution Margin Ratio?
A) 75%
B) 100