Question

Exercise 2-17 (Part Level Submission) Erin Brushwood sells gourmet chocolate chip cookies. The results of her last month of operations are as follows: Sales revenue $ 49,742 Cost of goods sold (all variable) 25,443 Gross margin 24,299 Selling expenses (20% variable) 8,239 Administrative expenses (60% variable) 11,152 Operating income $ 4,908 What is Erin’s contribution margin ratio? (Round contribution margin ratio to 2 decimal places, e.g. 52.75%.) Contribution margin ratio %

Answer 1

Sales Revenue		$49,742
Variable Expenses:
Cost of Goods Sold	$25,443
Selling Expense($8,239 × 20%)	$1,647.80
Administrative Expense($11,152 × 60%)	$6,691.20
Total Variable Expenses		$33,782
Contribution margin		$15,960

Contribution margin ratio = Contribution margin / Sales Revenue

Contribution margin ratio = $15,960 / $49,742

Contribution margin ratio = 0.3209 or 32.09%