Question

A manufacturer of tiling grout has supplied the following data:

Kilograms produced and sold 330,000
Sales revenue $1,920,000
Variable manufacturing expense $957,000
Fixed manufacturing expense $260,000
Variable selling and administrative expense $360,000
Fixed selling and administrative expense $226,000
Net operating income $117,000
The company's contribution margin ratio is closest to:

a. 50.2%
b. 81.3%
c. 31.4%
d. 74.7%

Answer 1

Answer:

c. 31.4%

Explanation:

As we know that

Contribution margin ratio is

= Contribution margin ÷ Sales revenue × 100

where,

Contribution margin is

= Sales revenue - Variable manufacturing expense - Variable selling and administrative expense

= $1,920,000 - $957,000 - $360,000

= $603,000

And the sales revenue is $1,920,000

So, the ratio is

= $603,000 ÷ $1,920,000 × 100

= 31.40%