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1 October, 12:20

Which of the following equations is true? Select one: a. Contribution margin = Sales revenue * Variable cost ratio b. Contribution margin = Fixed costs c. Contribution margin ratio = 1 - Variable cost ratio d. Contribution margin ratio = Contribution margin / Variable costs

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  1. 1 October, 12:49
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    Answer: c. Contribution margin ratio = 1 - Variable cost ratio

    Explanation:

    The Contribution margin ratio is defined as the difference between the sales price of a good and it's variable costs. It is expressed as a percentage.

    The formula is,

    Contribution Margin Ratio = Sales - Variable Costs / Sales

    Breaking the formula down further we have,

    Contribution Margin Ratio = Sales / Sales - Variable Costs / Sales

    Contribution Margin Ratio = 1 - Variable Costs / Sales

    Variable Cost/Sales is the Variable Cost Ratio.

    So Option C is correct.
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Home » Business » Which of the following equations is true? Select one: a. Contribution margin = Sales revenue * Variable cost ratio b. Contribution margin = Fixed costs c. Contribution margin ratio = 1 - Variable cost ratio d.
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