Question:
Cartier Corporation currently sells its products for $50 per unit. The company’s variable costs are $20 per unit. Fixed expenses amount to a total of $5,000 per month. What is the company’s contribution margin ratio?
Answer:
S.P (Selling price) = $50 per unit
F.C (Fixed expenses) = $5,000 per month
V.C (Variable cost) = $20 per unit
C.M (Contribution margin) = S.P – V.C
= $50 – $20
= $30
Contribution margin ratio = C.M ÷ S.P * 100
= $30 ÷ $50 * 100
= 60%
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