Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales $ 1,080,000 Variable expenses 540,000 Contribution margin 540,000 Fixed expenses 160,000 Net operating income $ 380,000 Required: Answer each question independently based on the original dа ta: 1. What is the product's CM ratio

Question

Business

Alijah Townsend

2 October, 07:06

Feather Friends, Inc., distributes a high-quality wooden birdhouse that sells for $40 per unit. Variable expenses are $20.00 per unit, and fixed expenses total $160,000 per year. Its operating results for last year were as follows: Sales $ 1,080,000 Variable expenses 540,000 Contribution margin 540,000 Fixed expenses 160,000 Net operating income $ 380,000 Required: Answer each question independently based on the original dа ta: 1. What is the product's CM ratio

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Farrell · Answer 1

50%

Explanation:

The formula and the computation of the contribution margin ratio is shown below:

Contribution margin ratio = (Contribution margin per unit) : (selling price per unit) * 100

where,

Contribution margin per unit = Selling price per unit - Variable expense per unit

= $40 per unit - $20 per unit

= $20 per unit

So, the CM ratio is

= ($20 per unit) : ($40 per unit) * 100

= 50%