If+sales+are+$814,000,+variable+costs+are+65%+of+sales,+and+operating+income+is+$277,000,+what+is+the+contribution+margin+ratio?

Answer by Guest

35 % is the contribution margin ratio.

Operating income = $ 271,000

Sales = $ 814,000

Variable costs = 65 % of sales

= 814,000 x 65 %

= $ 529,100

Contribution margin = Sales - Variable costs

= 814,000 - 529,100

= $ 284,900

Contribution margin ratio = Contribution margin / Sales

 284,900 / 814,000 =

= 35 %.

The contribution margin ratio (CM ratio) of an enterprise is identical to its sales much less all variable costs, divided with the aid of using its sales. It represents the marginal advantage of manufacturing one extra unit.

The contribution margin ratio is the distinction among a company's income and variable costs, expressed as a percentage. This ratio indicates the quantity of cash to be had to cowl constant costs.

The nearer a contribution margin percent, or ratio, is to 100%, the better. The better the ratio, the extra cash is to be had to cowl the enterprise's overhead expenses, or constant costs. However, it is much more likely that the contribution margin ratio is nicely underneath 100%, and in all likelihood underneath 50%.

Learn more about contribution margin ratio here: brainly.com/question/24039258

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If sales are $814,000, variable costs are 55% of sales, and operating income is $277,000, what is the contribution margin ratio?

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