Evergreen Corporation Manufactures Circuit Boards and Is in the Process

question 58

Multiple Choice

Evergreen Corporation manufactures circuit boards and is in the process of preparing next year's budget. The pro forma income statement for the current year is presented below.
$\begin{array}{lr}\text {Sales}&&\$3,500,000\\\text {Cost of sales:}\\\text { Direct Material } & \$ 500,000 \\\text { Direct labor } & 250,000 \\\text { Variable Overhead } & 275,000 \\\text { Fixed Overhead } & 600,000&1,625,000\\\text { Gross Profit}&&\$1,875,000\\\text { Selling and General \& Admin. Exp.}\\\text { Variable}&750,000 \\\text { Fixed}&250,000&1,000,000\\\text { Operating Income }&&\$875,000\end{array}$
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The contribution margin ratio for the current year is:

• A) 53.6%.
• B) 49.3%.
• C) 46.4%.
• D) 25%.

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Definitions:

Current Sales

Sales made and completed within a specific accounting period, emphasizing the company's operational performance.

Return on Equity

A metric reflecting how efficiently a company turns shareholder investments into profits.

Dividend Payout Ratio

An economic indicator reflecting the proportion of a corporation's net earnings distributed to its stockholders as dividends.

Equity Multiplier

A financial leverage ratio that measures the portion of a company’s assets that are financed by stockholder's equity.