MI – May 2016 – L1 – SA – Q9 – Cost-Volume-Profit (CVP) Analysis

Calculate the contribution/sales ratio given the budgeted sales and costs.

Question

A company budgets to sell 55,000 units of its products at N40 per unit for a variable cost of N15. If the fixed cost for the period is expected to be N340,000, then the contribution/sales ratio is:

A. 60.5
B. 61.5
C. 62.5
D. 63.5
E. 64.5

Answer

Answer: C

Explanation:
The contribution margin per unit is calculated as the selling price per unit minus the variable cost per unit, which is N40 – N15 = N25. The contribution/sales ratio is then calculated by dividing the contribution margin per unit by the selling price per unit:

Tags: Contribution margin, Contribution/Sales Ratio, Fixed Cost, Sales, Variable Cost
Level: Level 1

Topic: Cost-Volume-Profit (CVP) Analysis
Series: MAY 2016

Uploader: Kwame Aikins