The Gasson Company sells three products, Product A, Product B and Product C, and had sales of £1,000,000 during the month of June. The company's overall contribution margin ratio was 37% and fixed expenses totaled £350,000. Sales were: Product A, £500,000; Product B, £300,000; and Product C, £200,000. Traceable fixed costs were: Product A, £120,000; Product B, £100,000; and Product C, £60,000. The variable expenses of Product A were £300,000 and the variable expenses of Product B were £180,000.
-The contribution margin ratio for Product C is

Question

Quizplus · Accepted Answer

The contribution margin ratio for Product C is calculated by first determining its contribution margin. The total sales for Product C are £200,000, and the traceable fixed costs are £60,000. The overall contribution margin ratio is 37%, so the total contribution margin is £370,000 (£1,000,000 * 37%). Subtracting the contribution margins of Products A and B from the total gives the contribution margin for Product C: £370,000 - (£500,000 - £300,000) - (£300,000 - £180,000) = £370,000 - £200,000 - £120,000 = £50,000. The contribution margin ratio for Product C is then £50,000 / £200,000 = 25%.

The Gasson Company Sells Three Products, Product A, Product B