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:

Net Profit Margin Percentage

A profitability metric that calculates the percentage of net income derived from revenue, indicating how much of each dollar in revenue results in profit.

Return on Equity

A measure of financial performance calculated by dividing net income by shareholders' equity, indicating how effectively management is using a company's assets to create profits.

Gross Margin Percentage

A financial metric that represents the percentage of total sales revenue remaining after accounting for the cost of goods sold.

Return on Equity

A gauge of a business's earnings effectiveness, demonstrating the profitability produced per dollar invested by shareholders.