Noel & Vang Company sells only one product at a regular price of $9.00 per unit.Variable expenses are 55% of sales, and fixed expenses are $40,000.Management has decided to decrease the selling price to $8.00 in the hope of increasing its volume of sales.What is the contribution margin ratio when the selling price is reduced to $8.00 per unit? (Note: Round answer to two decimal places.)
A) 38.13%
B) 40.50%
C) 75.46%
D) 60.50%

Question

Quizplus · Accepted Answer

SUPPORTING CALCULATIONS:
Contribution Margin Ratio = Unit Contribution Margin / Price
Unit Contribution Margin = Price - Unit Variable Cost
Unit contribution margin = [$8.00 - ($9.00 × 55%)] = ($8.00 - $4.95) = $3.05
Contribution margin ratio = $3.05 / $8.00 = 0.3813 or 38.13%

Noel & Vang Company Sells Only One Product at a Regular