Old Canadian Company Has Sales of $500,000, Variable Costs of $425,000

question 38

Multiple Choice

Old Canadian Company has sales of $500,000, variable costs of $425,000, and fixed costs of $25,000.New World Company has sales of $500,000, variable costs of $200,000, and fixed costs of $250,000.Old Canadian's contribution margin ratio is

• A)15%.
• B)60%.
• C)85%.
• D)95%.

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Definitions:

Credit Sales

Sales made by a business where the payment is received after the sale has been made, typically recorded as accounts receivable.

Adjustment

Entries made in preparing financial statements to allocate expenses or revenues to the appropriate accounting period.

Aging Report

A financial report that categorizes a company's accounts receivable according to the length of time an invoice has been outstanding.

Allowance for Doubtful Accounts

This is a contra-asset account that reduces the total amount of accounts receivable reported on the balance sheet, reflecting the estimate of non-collectible amounts due to credit sales.