Assume that the following information was available for Bonobos Company. How would its owner, Brian Spaly, evaluate this information based on contribution margin ratio?
$$\begin{array} { | l | r | r | r | }
\hline & \begin{array} { c }
\text { Orange } \
\text { Crush }
\end{array} & \begin{array} { c }
\text { Spider } \
\text { Fighters }
\end{array} & { \text { Cubbies } } \
\hline \text { Sales } & \$ 500,000 & \$ 700,000 & \$ 900,000 \
\hline \text { Variable expenses } & & & \
\hline \text { Variable production } & \$ 50,000 & \$ 140,000 & \$ 270,000 \
\hline \text { Variable advertising } & \$ 5,000 & \$ 14,000 & \$ 36,000 \
\hline \text { Variable shipping } & \$ 10,000 & \$ 28,000 & \$ 72,000 \
\hline
\end{array}$$

Question

Assume that the following information was available for Bonobos Company. How would its owner, Brian Spaly, evaluate this information based on contribution margin ratio?
$$\begin{array} { | l | r | r | r | } 
\hline & \begin{array} { c } 
\text { Orange } \
\text { Crush }
\end{array} & \begin{array} { c } 
\text { Spider } \
\text { Fighters }
\end{array} &  { \text { Cubbies } } \
\hline \text { Sales } & \$ 500,000 & \$ 700,000 & \$ 900,000 \
\hline \text { Variable expenses } & & & \
\hline \text { Variable production } & \$ 50,000 & \$ 140,000 & \$ 270,000 \
\hline \text { Variable advertising } & \$ 5,000 & \$ 14,000 & \$ 36,000 \
\hline \text { Variable shipping } & \$ 10,000 & \$ 28,000 & \$ 72,000 \
\hline
\end{array}$$

Quizplus · Accepted Answer

The contribution margin ratio is calculated as (Sales - Variable Expenses) / Sales. For Orange Crush, the contribution margin ratio is highest because its variable expenses are significantly lower relative to its sales compared to the other products.

Assume That the Following Information Was Available for Bonobos Company