Which of the Following Formulas Is Used to Calculate the Contribution

question 64

Multiple Choice

Which of the following formulas is used to calculate the contribution margin ratio?

• A) (Sales − Fixed costs) ÷ Sales.
• B) (Sales − Cost of goods sold) ÷ Sales.
• C) (Sales − Variable costs) ÷ Sales.
• D) (Sales − Total costs) ÷ Sales.

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Definitions:

Flexible Budget Performance Report

A report comparing actual operating results to a budget that adjusts with changes in the volume of activity.

Contribution Margin

The difference between sales revenue and variable costs, indicating how much revenue is contributing to fixed costs and profit.

Fixed Budget

A budget that remains constant, regardless of changes in the volume of activity, sales, or other factors.

Direct Materials Quantity Variance

The difference between the actual amount of materials used in production and the expected amount.