Which of the following equations is TRUE?
A) Contribution margin = Sales revenue × Variable cost ratio
B) Contribution margin ratio = Contribution margin/Variable costs
C) Contribution margin = Fixed costs
D) Contribution margin ratio = 1 - Variable cost ratio

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated as 1 minus the variable cost ratio. This is because the contribution margin ratio represents the portion of sales revenue that is not consumed by variable costs, thus contributing to covering fixed costs and generating profit.

Which of the Following Equations Is TRUE