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2 July, 18:39

Concord Corporation reported the following information for the current year: Sales (42000 units) $840000, direct materials and direct labor $420000, other variable costs $42000, and fixed costs $360000. What is Concord's contribution margin ratio?

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  1. 2 July, 22:00
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    Contribution margin ratio is 45%, in value it is $378,000.00

    Explanation:

    Contribution margin ratio is sales - (direct costs + variable costs)

    Here sales = $840,000.00

    Direct costs = $420,000.00

    Variable costs = $42,000.00

    Thus $840,000.00 - ($420,000.00 + $42,000.00) = $378,000.00

    As a percentage of sales = $378,000.00 / $840,000.00 = 45%

    Fixed cost is of no relevance for computing contribution margin.

    Also contribution margin is generally calculated as a percentage of sales value.

    Contribution margin = 45% or $378,000.00
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