Wiser Group Sells a Single Product for $30 Per Unit

question 271

Multiple Choice

Wiser Group sells a single product for $30 per unit. The variable costs for each unit are $7.50, while the total fixed costs are $4,500. If a 10% sales commission is introduced what is the new Contribution Margin Ratio?

• A) 72.5%
• B) 65%
• C) 75%
• D) No Change

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Definitions:

Merchandise sold cost

The cost associated with the goods that have been sold to customers, typically accounting for the purchase or production cost of the merchandise.

Perpetual inventory system

A method of accounting that continuously updates the inventory balance, recording each purchase and sale of goods immediately through inventory accounts.

FIFO inventory cost method

An inventory valuation method where the cost of goods sold is based on the cost of the earliest purchased items, standing for "First In, First Out".

Ending inventory value

The final value of all unsold goods at the end of an accounting period.