If Sales Are $425,000, Variable Costs Are 62% of Sales

question 123

Multiple Choice

If sales are $425,000, variable costs are 62% of sales, and operating income is $50,000, what is the contribution margin ratio?

• A) 38%
• B) 26.8%
• C) 11.8%
• D) 62%

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Definitions:

Economic Profit

The split between a firm's entire proceeds and its total disbursements, embracing both acknowledged and veiled costs.

Normal Profit

The minimum profit necessary for a company to remain competitive in the market, equating to the opportunity cost of the resources employed.

Normal Profit

The minimum level of profit necessary for a company to remain competitive in the market, often considered the break-even point.

Marginal Cost

Marginal cost is the increase in total cost that arises from producing one more unit of a good or service. It is a critical concept in economics for decision-making regarding production levels.