Question

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs...

What ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit?

Group of answer choices

margin of safety ratio

contribution margin ratio

costs and expenses ratio

profit ratio

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Answer #1

Answer- The following ratio indicates the percentage of each sales dollar that is available to cover fixed costs and to provide a profit = Contribution margin ratio.

Explanation- Contribution margin ratio shows the percentage of each sales dollar that is available to cover organisation fixed expenses and profit.

The formula to calculate contribution margin ratio are as follows-

= (Contribution margin/Total sales)*100

Where- Contribution margin = Sales - Variable costs

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