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The contribution margin ratio explains the percentage of each sales dollar that

a. contributes towards fixed costs and generating a profit.

b. contributes towards variable costs.

c. contributes towards period expenses.

d. contributes towards sales revenue.

 

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Sixta Kovacek
Sixta KovacekLv2
29 Jan 2020

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Related questions

Foxx Company’s cost structure is dominated by variable costswith a contribution margin ratio of 0.30 and fixed costs of$95,400. Every dollar of sales contributes 30 cents toward fixedcosts and profit. The cost structure of a competitor, Beyonce,Inc., is dominated by fixed costs with a higher contribution marginratio of 0.80 and fixed costs of $307,400. Every dollar of salescontributes 80 cents toward fixed costs and profit. Both companieshave sales of $530,000 per month.

(a)

Compare the two companies’ cost structures using the formatshown below.
Foxx Company Beyonce, Inc.
Amount Percentage (%) Amount Percentage (%)
Sales
Variable Cost
Contribution Margin
Fixed Costs
Operating Profit
(b) Suppose that both companiesexperience a 10 percent increase in sales volume. By how much wouldeach company’s profits increase?

Foxx Company's profits increase by

Beyonce Inc's profits increase by

Consider the following information and answer the questionbelow.

Selling

Direct Labour

Advertising

Machinery

Sales

price

cost

cost

costs

Product X

12,000 units

$5 per unit

$3 per unit

$400

$5000

Product Y

16,000 units

$4 per unit

$3.50 per unit

$200

$6200

Which of the following is true? Product X:

Select one:

a. contributes more to profit than Product Y.

b. has higher variable costs than Product Y.

c. produces lower profits than Product Y.

d. has higher fixed costs that Product Y.

In describing the cost equation, y = mx + b, "m" is:

A. The dependent variable, cost B. The independent variable, thelevel of activity C. The total fixed costs D. The variable cost perunit of activity

A disadvantage of the high-low method of cost analysis isthat:

A.

It cannot be used when there are a very large number ofobservations
B.

It is too time consuming to apply
C.

It uses two extreme data points, which may not be representativeof normal conditions
D.

It relies totally on the judgment of the person performing thecost analysis

A 45% contribution margin ratio means that:

A.

The company contributes 45% of its operating income tocharities
B.

55% of the company’s revenue is consumed by fixed and variablecosts
C.

The company’s revenue has increased by 45% from the priorperiod
D.

45% of the company’s revenue is available to cover fixed costsand to contribute towardoperating income

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