Wendall Company sells only one product at a regular sales price of $7.50 per unit. At that sales price, variable costs are 60% of sales, and fixed costs are $30,000. Management has decided to decrease the sales price to $6 in hopes of increasing its volume of sales. What is the contribution margin ratio when the sales price is reduced to $6 per unit?
A) 25%
B) 40%
C) 60%
D) 75%

Question

Quizplus · Accepted Answer

Contribution margin ratio = (Sales price - Variable cost) / Sales price= (6 - 0.6 * 6) / 6= 25%

Wendall Company Sells Only One Product at a Regular Sales