The Following Data Relate to a Company That Produces and Sells

question 5

Multiple Choice

The following data relate to a company that produces and sells a travel guide that is updated monthly:
$\begin{array} { | l | r | } \hline \text { Fixed costs: } & \\\hline \text { Copy editing } & \$ 6,000 \\\hline \text { Art work } & \$ 2,000 \\\hline \text { Typesetting } & \$ 72,000 \\\hline\end{array}$
$\begin{array} { | l | l | } \hline \text { Variable costs: } & \\\hline \text { Printing and binding } & \$ 3.20 \text { per copy } \\\hline \text { Bookstore discounts } & \$ 4.00 \text { per copy } \\\hline \text { Salespersons' commissions } & \$ 0.50 \text { per copy } \\\hline \text { Author's royalties } & \$ 2.00 \text { per copy }\\\hline \end{array}$ Each book sells for $20.00. The company sold 8,000 books in June and 10,000 books in July.




-What is the contribution margin ratio for the book?

• A) 71.5%.
• B) 54.0%.
• C) 51.5%.
• D) 51.9%.

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Definitions:

Marginal Cost

The cost of producing one additional unit of a product or service.

Relevant Range

The range of activity or volume in which the assumptions about fixed costs and variable costs are valid.

Variable Cost

Costs that fluctuate with the level of output, such as materials and labor directly involved in production.

Cost Driver

An element that leads to a variation in the expense associated with an action.