The Contribution Margin Ratio

question 7

Multiple Choice

The contribution margin ratio:

• A)Is the percent of each sales dollar that remains after deducting the total unit variable cost.
• B)Is the percent of each sales dollar that remains after deducting the total unit fixed cost.
• C)Is the percent of each sales dollar that remains to cover the variable and fixed costs.
• D)Cannot be used in conjunction with other analytical tools.
• E)Is the same as the unit contribution margin.

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Definitions:

Direct Materials

Raw materials that are directly traceable to the manufacturing of a specific product.

Continuous Process

A production method used to manufacture, produce, or process materials without interruption.

Conversion Cost

The combined costs of direct labor and manufacturing overhead involved in transforming materials into finished goods.

Equivalent Unit

In cost accounting, it represents a measure that converts the work done on partial units of output into the amount of completed units that could have been produced with that amount of work.