Mom and Pop's Ice Cream Shoppe sells ice cream cones for $5

Accounting Feb 25, 2021

Mom and Pop's Ice Cream Shoppe sells ice cream cones for $5.00 per customer. Variable costs are $2.25 per cone. Fixed costs are $3,000 per month. What is the company's contribution margin ratio?

A) 182%

B) 45%

C) 3%

D) 55%

Expert Solution

Answer: D

Explanation: D)

Sales $5.00

Less Variable costs 2.25

= Contribution Margin 2.75 divided by $5.00 sales = 55%

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