The contribution margin ratio:
A) Is the percent of each sales dollar that remains after deducting total unit variable cost.
B) Is the percent of each sales dollar that remains after deducting total unit fixed cost.
C) Is the percent of each sales dollar that remains to cover fixed costs and contribute to the managers' incomes.
D) Cannot be used in conjunction with other analytical tools.
E) Is the same as the unit contribution margin.

Question

Quizplus · Accepted Answer

The contribution margin ratio is the percentage of each sales dollar that remains after deducting total unit variable costs. It is calculated by dividing the contribution margin by total sales. This ratio helps in determining the profitability of a product, and it shows the extent to which sales cover fixed costs and contribute to profit.

The Contribution Margin Ratio