Contribution Margin Analysis – Short Answer

Practice Question

Intro to Managerial Accounting
Decision-Making: Cost-Volume-Profit Analysis
Contribution Margin Analysis
Short Answer

Calculate the contribution margin ratio if the total sales are $500,000 and variable costs are $300,000.

Answer +
Correct Answer: 40%
Explanation +

Contribution Margin Ratio = (Sales – Variable Costs) / Sales = ($500,000 – $300,000) / $500,000 = 0.40 or 40%.

This ratio aids in assessing profitability (Page 47).