Chapter 5, Problem 2BE

(A)

To determine

Contribution Margin ratio: It is a ratio that measures the contribution margin generated by the company from the sales to make it avialable for paying the fixed cost and generate a profit. It is expressed as percentage of margin available from each dollar sales to pay fixed expenses and to provide profit. It is also called as profit-volume ratio. The formula to calculate the contribution margin ratio is as follows:

$\text{Contribution}\text{Margin}\text{Ratio }=\frac{\text{Contribution}\text{Margin}}{\text{Sales}}\times 100$

contribution margin ratio.

(B)

To determine

the unit contribution margin.

(C)

To determine

the income from operations.