Abby Cleaning Service had the following information for the 200 customers served this month: Sales Revenue $20,000 Variable Costs 8,000 What is the contribution margin ratio?

= 60%

Explanation:

Contribution ratio represents the marginal benefits of producing an extra unit. It is calculated by the formula.

CM ration = Contribution margin / sales revenue

Contribution margin = sales - varible costs

therefore contribution margin ratio = sales - revenue / sales x 100

=$20,000 - $ 8000 / 20,000 x 100

= 12000/20000 x 100

=0.6 x 100

= 60%