Question

Mitchell Corporation manufactures a single product. The selling price is $85 per unit, and variable costs amount to $68 per unit. The fixed costs are $16,500 per month. What is the contribution margin ratio of Mitchell's product? A) 65% B) 72% C) 20% D) 80%

Answer 1

Your required answer is option C i.e. 20%

Explanation:

Contribution margin is calculated by Contrubtion/sales*100 and therefore firstly we need to calculate Contribution i.e. (sales - Variable cost)

$Contribution Margin = \frac{Contribution}{Sales}X100$

$Contribution Margin = \frac{\$17}{\$85}X100$

Where:

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