Homework Answers
If Forrester Company purchases this equipment:
Selling Price will remain constant at $100 but variable costs per unit will decrease by $10
Selling Price = $100
Variable Costs per unit = $70 - $10
Variable Costs per unit = $60
Contribution Margin Ratio = (Selling Price - Variable Costs per
unit) / Selling Price
Contribution Margin Ratio = ($100 - $60) / $100
Contribution Margin Ratio = $40 / $100
Contribution Margin Ratio = 40%
So, revised contribution margin ratio would be 40%
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