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20 September, 09:08

Dairy Days Ice Cream sells ice cream cones for $5 per customer. Variable costs are $2 per cone. Fixed costs are $2100 per month. What is Dairy Days' contribution margin ratio?

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  1. 20 September, 09:24
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    0.6 or 60%

    Explanation:

    The contribution margin ratio is calculated by the formula below.

    Contribution margin ratio = contribution margin

    sales revenue

    = For Dairy D's

    Contribution margin per unit = sales - variable expenses

    =$5-$2

    = $3 per unit

    Contribution margin = Contribution margin per unit

    sale price per unit

    =3/5

    =0.6 or 60%
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