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What is the formula for calculating the contribution margin ratio?
What is the formula for calculating the contribution margin ratio?
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Practice Questions
1 question
Q1
What is the formula for calculating the contribution margin ratio?
Contribution Margin / Sales
Sales / Contribution Margin
Fixed Costs / Variable Costs
Variable Costs / Sales
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The contribution margin ratio is calculated as Contribution Margin divided by Sales.
Questions & Step-by-step Solutions
1 item
Q
Q: What is the formula for calculating the contribution margin ratio?
Solution:
The contribution margin ratio is calculated as Contribution Margin divided by Sales.
Steps: 6
Show Steps
Step 1: Understand what Contribution Margin is. It is the amount left from sales after subtracting variable costs.
Step 2: Know the formula for Contribution Margin: Contribution Margin = Sales - Variable Costs.
Step 3: Calculate the Contribution Margin using the formula from Step 2.
Step 4: Understand that the Contribution Margin Ratio shows what portion of sales contributes to covering fixed costs and profit.
Step 5: Use the formula for Contribution Margin Ratio: Contribution Margin Ratio = Contribution Margin / Sales.
Step 6: Plug in the values you calculated for Contribution Margin and Sales into the formula from Step 5.
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