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21 June, 07:08

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.)

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  1. 21 June, 07:19
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    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%
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