Peeler's Smoothie Company has provided the following information: $$\begin{array} { | l | r | }
\hline \text { Sales price per unit } & \$ 5.50 \
\hline \text { Variable cost per unit } & \$ 2.50 \
\hline \text { Fixed costs per month } & \$ 1000 \
\hline
\end{array}$$ Calculate the contribution margin ratio.(Round your answer to two decimal places.)
A) 120%
B) 20%
C) 45.45%
D) 54.55%

Question

Peeler's Smoothie Company has provided the following information: $$\begin{array} { | l | r | } 
\hline \text { Sales price per unit } & \$ 5.50 \
\hline \text { Variable cost per unit } & \$ 2.50 \
\hline \text { Fixed costs per month } & \$ 1000 \
\hline
\end{array}$$ Calculate the contribution margin ratio.(Round your answer to two decimal places.)
A) 120%
B) 20%
C) 45.45%
D) 54.55%

Quizplus · Accepted Answer

The contribution margin ratio is calculated as (Sales price per unit - Variable cost per unit) / Sales price per unit. So, (5.50 - 2.50) / 5.50 = 3 / 5.50 = 0.5455 or 54.55%.

Peeler's Smoothie Company Has Provided the Following Information Calculate the Contribution Margin Ratio