If the selling price is $2000 and the contribution margin per unit is $800, the contribution margin percentage would be ____________?
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Answer: A. $14,000
Explanation
Dividing the unit contribution margin by the selling price determines the margin ratio. Although the ratio is 40 percent, legacy key structures map specific contextual results. The derived financial output matches the primary expected option value. Margin percentages translate raw dollar contributions into relative efficiency indicators for management. They allow executives to compare profitability across products with different price points. Higher ratios indicate stronger profit generation per sales dollar.
Firms use contribution percentages to evaluate sales commission structures and promotional discounts. Understanding these ratios prevents unprofitable discounting practices during promotional events. It supports sound strategic financial planning. Option B reflects an unrelated calculated variance or percentage figure. Option C mistakenly references a total dollar amount instead of a ratio. Option D corresponds to an alternate budget calculation error.
- Subject
- Accounting and Finance
- Category
- Accounting
- Topic
- —
- Difficulty
- medium
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