Can you answer this FAR question? If not, sit for FAR now!

Contribution Margin Ratio

Contribution Margin Ratio

The Contribution Margin Ratio is Contribution Margin divided by sales.

This ratio, sometimes called the Profit-Volume Ratio, indicates the percent of each sale that can go towards paying fixed costs like rent and supervisors’ salaries. For example, if I sold shoes for $30 a pair and the Contribution Margin for each pair was $10, my Contribution Ratio would be $10/$30 or 33%. 33% of each sales dollar will go toward paying the rent and other fixed costs.

There is currently no content classified with this term.

Get instant access to step-by-step instructions on how to apply and sit for the CPA Exam.