Question

Apple Inc. has a $350,000 investment opportunity with the following characteristics: Contribution Margin $ 500,000 Contribution...

Apple Inc. has a $350,000 investment opportunity with the following characteristics:

Contribution Margin

$

500,000

Contribution margin ratio

50

% of sales

Fixed expenses

$

50,000

The margin for this investment opportunity is closest to:

A) 50.0%

B) 45.0%

C) 5.0%

D) 55.0%

Business   Accounting   
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Homework Answers

Answer #1
  • Margin is calculated on Sales Value.
  • Sales Value is to be first calculated.
  • Answer, along with working:

A

Contribution margin

$        500,000.00

B

CM Ratio

50%

C = A/B

Total Sales

$    1,000,000.00

D

Fixed expenses

$          50,000.00

E = A - D

Net Income

$        450,000.00

F = (E/C) x 100

Margin for Investment

45.0%

Correct answer

Option 'B' 45.0%

  • Answer: Option ‘B’ 45%
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