Dunkin Company manufactures and sells a single product that sells for $480 per unit; variable costs are $300. Annual fixed costs are $990,000. Current sales volume is $4,200,000. Compute the contribution margin ratio.

Question

Quizplus · Accepted Answer

The contribution margin ratio is calculated by dividing the contribution margin by the sales revenue. The contribution margin is the difference between the selling price per unit and the variable cost per unit. In this case, the contribution margin is $480 - $300 = $180. The sales revenue is $4,200,000. Therefore, the contribution margin ratio is $180 / $4,200,000 = 37.5%.

Dunkin Company Manufactures and Sells a Single Product That Sells