Kingston Company sells its product for $200 per unit. The company's accountant provided the following cost information: $$\begin{array} { | l | l | }
\hline \text { Manufacturing costs } & \$ 25,000 + 40 \% \text { of sales } \
\hline \text { Selling costs } & \$ 10,000 + 20 \% \text { of sales } \
\hline \text { Administrative costs } & \$ 15,000 + 10 \% \text { of sales } \
\hline
\end{array}$$ What is Kingston Company's contribution margin ratio?
A) 30%
B) 15%
C) 35%
D) 20%

Question

Kingston Company sells its product for $200 per unit. The company's accountant provided the following cost information: $$\begin{array} { | l | l | } 
\hline \text { Manufacturing costs } & \$ 25,000 + 40 \% \text { of sales } \
\hline \text { Selling costs } & \$ 10,000 + 20 \% \text { of sales } \
\hline \text { Administrative costs } & \$ 15,000 + 10 \% \text { of sales } \
\hline
\end{array}$$ What is Kingston Company's contribution margin ratio?
A) 30%
B) 15%
C) 35%
D) 20%

Quizplus · Accepted Answer

The contribution margin ratio is calculated as the contribution margin divided by the sales revenue. The contribution margin is the difference between the sales revenue and the variable costs. In this case, the variable costs are the manufacturing costs, selling costs, and administrative costs that vary with the level of sales. The fixed costs are the manufacturing costs, selling costs, and administrative costs that do not vary with the level of sales.The contribution margin is calculated as follows:Contribution margin = Sales revenue - Variable costsContribution margin = $200 - ($25,000 + 40% of sales + $10,000 + 20% of sales + $15,000 + 10% of sales)Contribution margin = $200 - ($25,000 + $0.40 * sales + $10,000 + $0.20 * sales + $15,000 + $0.10 * sales)Contribution margin = $200 - ($50,000 + $0.70 * sales)The contribution margin ratio is calculated as follows:Contribution margin ratio = Contribution margin / Sales revenueContribution margin ratio = ($200 - ($50,000 + $0.70 * sales)) / salesContribution margin ratio = ($200 - $50,000 - $0.70 * sales) / salesContribution margin ratio = $150 / salesThe contribution margin ratio is 30%.

Kingston Company Sells Its Product for $200 Per Unit What Is Kingston Company's Contribution Margin Ratio? A) 30% B)

Kingston Company Sells Its Product for $200 Per Unit What Is Kingston Company's Contribution Margin Ratio?
A) 30%
B)