Duck Manufacturing sells rubber rain boots for $52 per pair. If Duck’s total fixed costs are $360,000 and the firm must sell 18,000 pairs of boots to break even, then what is the contribution margin ratio? Round your answer to the nearest tenth.

Contribution margin ratio is 38%

Explanation:

The contribution margin ration is the ratio of contribution over sales revenue.

The contribution in this parlance is difference between the sales revenue and variable costs.

Contribution=sales-variable costs

sales =volume * price

volume is 18000 pairs

price per unit is $52

However the variable is not given

Break-even units=fixed costs/(sales price-variable cost)

let variable cost per unit to be x

18000=360,000/(52-x)

(52-x)*18000=360000

52-x=360000/18000

52-x=20

x=52-20

x=32

contribution=52-32

contribution =$20

contribution margin ratio=20/52

                                        =0.38 or 38%

38.5%

Explanation:

we need to find out the contribution margin using the break even point formula:

break even point in units = total fixed costs / contribution margin

contribution margin = total fixed costs / break even point in units

contribution margin = $360,000 / 18,000 units = $20

contribution margin ratio = contribution margin / sales price =  $20 / $52 = 38.5%

The contribution margin ratio measures the difference between a company's sales price and its variable expenses per unit.