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Homework answers / question archive / Suppose Kathy Lentz Company sells hand tatted lace for $25 per yard
Suppose Kathy Lentz Company sells hand tatted lace for $25 per yard. Her materials cost $4 per yard and labor costs her $10 per yard. She also estimates her fixed cost to be $50 per month. If she sells 2,000 yards of lace during the month, what is her contribution margin ratio?
Computation of the contribution margin ratio:-
Contribution margin per unit = Selling price per unit - Variable cost per unit
= $25 - ($4 + $10)
= $25 - $14
= $11
Contribution margin ratio = Contribution margin per unit / Selling price per unit
= $11 / $25
= 44%
