LO 3.1A company’s product sells for $150 and has variable costs of $60 associated with the product. What is its contribution margin ratio?

10%

40%

60%

90%

60%

Explanation:

Contribution margin ratio is calculated by dividing the contribution margin amount by sales.

Contribution margin is sales less variable cost to produce a product.

Sale price 150

Variable cost (60)

Contribution margin 90

Contribution margin ratio: 90 / 150 = 60%