Contribution margin ratio

Question 1

What is the formula for calculating the contribution margin ratio?

Answer 1

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

Question 2

True or False: The contribution margin ratio indicates the percentage of sales revenue that exceeds variable costs.

Answer 2

True

Question 3

Fill in the blank: The unit contribution margin is calculated as sales price per unit minus __________.

Answer 3

variable cost per unit

Question 4

What does a higher contribution margin ratio indicate?

Answer 4

It indicates that a larger portion of sales revenue is available to cover fixed costs and contribute to profit.

Question 5

If a product has a selling price of $50 and variable costs of $30, what is its unit contribution margin?

Answer 5

$20

Question 6

Multiple Choice: Which of the following is true about the contribution margin ratio? A) It can be negative B) It is always 100% C) It reflects the profitability of a product D) It only applies to fixed costs

Answer 6

C) It reflects the profitability of a product

Question 7

How can businesses use the contribution margin to make decisions?

Answer 7

Businesses can use it to determine pricing strategies, product line selection, and assessing the impact of fixed costs.

Question 8

True or False: The contribution margin can be used to assess break-even points.

Answer 8

True

Question 9

What is the relationship between total contribution margin and fixed costs?

Answer 9

The total contribution margin must cover fixed costs to achieve profitability.

Question 10

If the contribution margin ratio is 40%, what percentage of sales is used to cover variable costs?

Answer 10

60%