Question

Q 6.40: Anders Interiors produces lamps with a selling price of $150 and a contribution margin ratio of 30%. Variable costs include cost of goods sold and sales commissions. Next year, cost of goods sold will be $80 per unit, and sales commissions will be 4% of sales. There will be no change in unit selling price. Calculate the new contribution margin ratio. A 53% 57% 43% 47%

Answer 1

Total variable cost = Cost of goods sold per unit + Sales commission per unit

= $80 + (4% X $150)

= $86

Contribution margin per unit = Selling price per unit - Variable cost per unit

= $150 - $86

= $64

Contribution margin ratio = Contribution margin per unit / Selling price per unit

= $64 / $150

= 43%

Option C.