6. Assume that the following information was available for Guy Brown Company. Ho

Question

6. Assume that the following information was available for Guy Brown Company. How would Maria Teresa Vazquez and the other owners evaluate this information based on contribution margin ratio?

Sales
Variable expenses

Variable production Variable advertising Variable shipping

Recycled Toner Cartridges

$500,000

$50,000 $5,000 $10,000

Office Supplies

$700,000

$140,000 $14,000 $28,000

Furniture $900,000

$270,000 $36,000 $72,000

A. Recycled toner cartridges has the lowest contribution margin ratio.
B. Furniture has the highest contribution margin ratio.
C. Office supplies has the highest contribution margin ratio.
D. Recycled toner cartridges has the highest contribution margin ratio.
E. Based on contribution margin ratio, the owners should consider expanding the furniture line and scaling back on office supplies and recycled toner cartridges.

Explanation / Answer

D. Recycled toner cartridges has the highest contribution margin ratio.

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