What is the company's contribution margin ratio?

Sales $1,200,000
Variable expenses 800,000
Contribution margin 400,000
Fixed expenses 300,000
Net operating income $100,000



sold 20000 units

A contribution margin ratio is just the contribution margin as a percent of sales. And to find what percent one thing is of another, you always divide in that order.

Contribution Margin Ratio = Contribution Margin / Total Sales

Contribution Margin = Sales – Variable Cost

CM Ratio = 400,000 / 1,200,000
CM Ratio = 33.33%