A product has a contribution margin ratio of 0.56. The sales price for the product is $38. The business has sold 87 units over the period.

What is the total contribution margin? Please answer to 2 decimal places.

Question

A product has a contribution margin ratio of 0.56. The sales price for the product is $38. The business has sold 87 units over the period.

What is the total contribution margin? Please answer to 2 decimal places.

BlackTom AI · Accepted Answer

1. Relevant knowledge points and concepts
Total contribution margin (CM) is the portion of sales revenue that contributes to covering fixed costs and profit. The contribution margin ratio (CM ratio) is defined as CM divided by total sales (or CM per unit divided by price per unit). Therefore, CM = CM ratio × total sales. Alternatively, CM per unit = price per unit × CM ratio, and total CM = CM per unit × number of units sold.

2. Complete reasoning process (step by step)
Step 1 — Compute total sales:
- Price per unit = $38.00
- Units sold = 87
Total sales = 38.00 × 87

Step 2 — Apply the contribution margin ratio to total sales:
- CM ratio = 0.56
Total contribution margin = Total sales × 0.56

3. Intermediate calculations shown
Total sales calculation:
38 × 87 = (38 × 80) + (38 × 7) = 3040 + 266 = 3306.00

Apply CM ratio:
3306.00 × 0.56 = 3306 × 56 / 100
3306 × 56 = (3306 × 50) + (3306 × 6) = 165300 + 19836 = 185136
Divide by 100: 185136 / 100 = 1851.36

4. Why the correct answer is correct
Using the definition CM = CM ratio × total sales, we applied the given ratio (0.56) to the exact total sales ($3,306.00). The arithmetic yields $1,851.36, which is the amount of revenue remaining after variable costs that can contribute to fixed costs and profit.

5. Other options / common errors
No multiple-choice options are provided here. Common mistakes would be (a) using the complement ratio (1 − 0.56 = 0.44) instead of 0.56, (b) forgetting to multiply by the number of units, or (c) confusing contribution margin with profit after fixed costs. Any such errors would produce incorrect values (for example, 3306 × 0.44 = $1454.64, which is not the CM).

6. Conclusion confirming the final answer
The total contribution margin is $1851.36, which matches the provided correct answer.

A product has a contribution margin ratio of 0.56. The sales price for the product is $38. The business has sold 87 units over the period. What is the total contribution margin? Please answer to 2 decimal places. 简答题

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