ECONOMICS

Detailed explanation-1: -Contribution margin ratio is the difference between your business’s sales (or revenue) and variable expenses for a given time period. As the name suggests, contribution margin ratio is expressed as a percentage.

Detailed explanation-2: -This contribution margin ratio tells us that 70% of the sales revenues (or 70% of the selling price) is available to cover the company’s $31, 000 of monthly fixed costs and fixed expenses ($18, 000 + $12, 000 + $1, 000). Once the $31, 000 has been covered, 70% of the revenues will flow to the company’s net income.

Detailed explanation-3: -Margins can never be more than 100 percent, but markups can be 200 percent, 500 percent, or 10, 000 percent, depending on the price and the total cost of the offer. The higher your price and the lower your cost, the higher your markup.

Detailed explanation-4: -The contribution margin ratio is the difference between a company’s sales and variable costs, expressed as a percentage. This ratio shows the amount of money available to cover fixed costs.