A product has a sales price of $150 and a per-unit contribution margin of $50. What is the contribution margin ratio?

Please answer to 2 decimal places

Question

A product has a sales price of $150 and a per-unit contribution margin of $50. What is the contribution margin ratio?

Please answer to 2 decimal places

BlackTom AI · Accepted Answer

Contribution margin ratio equals the per-unit contribution margin divided by the sales price.

1. Relevant knowledge points and concepts
- Contribution margin per unit = Sales price per unit − Variable cost per unit. Here the per-unit contribution margin is given directly as $50.
- Contribution margin ratio (CM ratio) = Contribution margin per unit ÷ Sales price per unit. This ratio can be expressed as a decimal or a percentage (decimal × 100 = percent).

2. Complete reasoning process (step by step)
- Start with the formula: CM ratio = (Contribution margin per unit) / (Sales price per unit).
- Substitute the given values: CM ratio = $50 / $150.

3. Calculations with intermediate steps
- $50 / $150 = 50 ÷ 150.
- Simplify the fraction: 50/150 = 1/3.
- Convert to decimal: 1 ÷ 3 = 0.333333...
- Round to two decimal places: 0.333333... → 0.33 (the third decimal digit is 3, which does not round the second decimal up).

4. Why the correct answer is correct
- The contribution margin ratio measures what portion of each dollar of sales contributes to covering fixed costs and profit. Dividing the unit contribution ($50) by the unit selling price ($150) correctly computes this proportion. The arithmetic yields 0.333... which, rounded to two decimal places as requested, is 0.33.

5. Why other potential answers would be incorrect
- A common mistake would be reversing the division (150/50 = 3.00) or using variable cost instead of contribution margin. Another error would be interpreting the percent (33.33%) as 0.3333 and then incorrectly rounding to 0.34; proper rounding to two decimal places gives 0.33 because the third decimal is 3 (<5).

6. Conclusion confirming the final answer
- Therefore, the contribution margin ratio is 0.33, which matches the provided correct answer.

A product has a sales price of $150 and a per-unit contribution margin of $50. What is the contribution margin ratio? Please answer to 2 decimal placesNumerical

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