If sales total $2,000,000, fixed costs total $800,000, and variable costs are 60% of sales, the contribution margin ratio is 40%.

Question

Quizplus · Accepted Answer

Contribution margin = revenue - variable costs

Contribution margin ratio = contribution margin / revenue

Variable costs = 0.6 x $2,000,000 = $1,200,000

Contribution margin = $2,000,000 - $1,200,000 = $800,000

Contribution margin ratio = $800,000 / $2,000,000 = 0.4 = 40%

Therefore, the statement is true.

If Sales Total $2,000,000, Fixed Costs Total $800,000, and Variable