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A product sells for $150 and has variable costs of $90. What is the contribution
A product sells for $150 and has variable costs of $90. What is the contribution margin ratio?
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A product sells for $150 and has variable costs of $90. What is the contribution margin ratio?
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Contribution Margin Ratio = (Selling Price - Variable Costs) / Selling Price = ($150 - $90) / $150 = 0.40 or 40%.
Questions & Step-by-step Solutions
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Q: A product sells for $150 and has variable costs of $90. What is the contribution margin ratio?
Solution:
Contribution Margin Ratio = (Selling Price - Variable Costs) / Selling Price = ($150 - $90) / $150 = 0.40 or 40%.
Steps: 7
Show Steps
Step 1: Identify the selling price of the product, which is $150.
Step 2: Identify the variable costs associated with the product, which are $90.
Step 3: Calculate the contribution margin by subtracting the variable costs from the selling price: $150 - $90.
Step 4: Perform the subtraction: $150 - $90 = $60. This is the contribution margin.
Step 5: Calculate the contribution margin ratio by dividing the contribution margin by the selling price: $60 / $150.
Step 6: Perform the division: $60 / $150 = 0.40.
Step 7: Convert the ratio to a percentage by multiplying by 100: 0.40 * 100 = 40%.
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