Noel & Vang Company Sells Only One Product at a Regular

question 141

Multiple Choice

Noel & Vang Company sells only one product at a regular price of $9.00 per unit.Variable expenses are 55% of sales, and fixed expenses are $40,000.Management has decided to decrease the selling price to $8.00 in the hope of increasing its volume of sales.What is the contribution margin ratio when the selling price is reduced to $8.00 per unit? (Note: Round answer to two decimal places.)

• A) 38.13%
• B) 40.50%
• C) 75.46%
• D) 60.50%

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Definitions:

Raw Materials Inventory

The stock of materials and components that a company holds for the future production of goods.

Present Analysis

The evaluation of current financial metrics and economic conditions to make decisions or forecasts about future performance.

Equipment Replacement

Equipment Replacement involves the process of substituting old, inefficient, or broken equipment with newer, more efficient models to maintain operational efficiency.

Incremental Cash Flows

The additional cash flow received by an organization from undertaking a new project, considered essential for analysis in capital budgeting.