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Dakota Company provides the following information about its single product: Targeted operating income $40,000 Selling price per unit $3.50 Variable cost per unit $1.05 Total fixed costs $90,000 What is the contribution margin ratio

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Answer:

57%

Explanation:

Contribution margin ratio is the ratio of difference between a company's revenue and variable expenses to the revenue of the company. It is usually expressed as a percentage.

This is also the ratio of the contribution margin to sales.

Given that Selling price per unit $3.50 Variable cost per unit $1.05

Contribution margin ratio

= (3.50 - 1.50)/ 3.50

=2/3.5

= 0.57

= 57%

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