A jeans maker is designing a new line of jeans called the Slims. The jeans will sell for $335 per pair and cost $261.30 per pair in variable costs to make. (Round your answers to 2 decimal places.)

(1) Compute the contribution margin per pair.

(2) Compute the contribution margin ratio.

Part (1) Compute the contribution margin per pair.

contribution margin $73.70

Part (2) Compute the contribution margin ratio.

contribution margin ratio 22%

Explanation:

Part (1) Compute the contribution margin per pair.

contribution margin = Selling Price - Variable Costs

= $335.00 - $261.30

= $73.70

Part (2) Compute the contribution margin ratio.

contribution margin ratio = Contribution/Selling Price * 100

= $73.70 / $335.00 * 100

= 22%

Answer: $73.70, 22%

Explanation:

Given the following;

Selling price per pair = $335

Variable cost per pair = $261.30

The contribution margin is calculated to find the amount by which revenue exceed variable cost.

Therefore, the contribution margin per pair of Jean is given by;

Selling price per pair - variable cost per pair

$335 - $261.30 = $73.70

b. The contribution margin ratio is given by;

(Total revenue - variable cost) : total revenue

(($335 - $261.30) : $335) * 100

($73.70 : $335) * 100 = 22%