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    Computing the Contribution Margin Ratio

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    I have a multiple choice problem I need help with:

    Sutton Company produces flash drives for computers, which it sells for $20 each. Each flash drive costs $6 of variable costs to make. During April, 1,000 drives were sold. Fixed costs for April were $2 per unit for a total of $2,000 for the month. How much is the contribution margin ratio?
    A) 30%
    B) 40%
    C) 60%
    D) 70%

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    Solution Preview

    The contribution margin is equal to sales revenues less variable costs. The contribution margin ratio equals the contribution margin ...

    Solution Summary

    This solution helps with problems about financial ratios.