Carrabelle Company has provided the following information: Sales price per unit $56 Variable cost per unit 12 Fixed costs per month $12,000 Calculate the contribution margin ratio. (Round your answer to two decimal places.)

The Contribution margin ratio (CRM) is 78.57%

Explanation:

CRM (Contribution margin ratio), it indicates the percentage (%) of each sales dollar available to cover the fixed assets as well as profits of the company.

The formula to compute the contribution margin ratio (CMR) is as:

CMR (contribution margin ratio) = (Sales - Variable expense) / Sales

where

Sales amounts to $56

Variable cost or expense amounts to $12

Putting the values above:

CRM (contribution margin ratio) = ($56 - $12) / $56

= $44 / $56

= 78.57%