Question

Oriole Bucket Co., a manufacturer of rain barrels, had the following data for 2019. Sales 2,940...

Oriole Bucket Co., a manufacturer of rain barrels, had the following data for 2019.

Sales 2,940 units
Sales price $50 per unit
Variable costs $40 per unit
Fixed costs $11,760

(a)

What is the contribution margin ratio?

Contribution margin ratio

enter the Contribution margin ratio in percentages

%
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Answer #1

Answer:

The Contribution Margin Ratio (in %) is 20%

It is given in the question that,

Sales (in units) = 2940 units

Sales Price = $50 per unit

Variable Costs = $40 per unit

Fixed Costs = $11,760

We know that the equation for

Contribution Margin Ratio (in %) = (Total Revenue - Total Variable Cost) ÷ Total Revenue x 100

Total Revenue = Sales in units x Sales Price per unit

= 2940 x 50

=$147,000

Total Variable Cost = Number of Units x Variable Cost per unit

= 2940 x 40

= $117,600

We can substitute these values in the equation,

Contribution Margin Ratio (in %) = (147,000 - 117,600) ÷ 147,000 x 100

= 20%

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