Paney Company makes calendars. Information on cost per unit is as follows: Direc

Question

Paney Company makes calendars. Information on cost per unit is as follows:

Direct materials

$1.50

Direct labor

1.20

Variable overhead

0.90

Fixed overhead

1.00

Variable marketing expense       

0.40

Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10.

What is the contribution margin ratio?

Paney Company makes calendars. Information on cost per unit is as follows:

Direct materials

$1.50

Direct labor

1.20

Variable overhead

0.90

Fixed overhead

1.00

Variable marketing expense       

0.40

Fixed marketing expense totaled $13,000 and fixed administrative expense totaled $35,000. The price per calendar is $10.

What is the contribution margin ratio?

Explanation / Answer

contribution margin ratio = (Price - Variable cost per unit) / Price

= (10-(1.50+1.20+0.90+0.40)) / 10

= 60%

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