Oslo Company prepared the following contribution format inco

Oslo Company prepared the following contribution format income statement based on a sales volume of 1,000 units (the relevant range of production is 500 units to 1,500 units):

Sales $ 21,800

Variable expenses 12,600

Contribution margin 9,200 Fixed expenses 7,452

Net operating income $ 1,748

2. What is the contribution margin ratio? (Enter your answer as a percentage rounded to 2 decimal places (i.e., 0.13579 should be entered as 13.58).)

3. What is the variable expense ratio? Round your percentage answer to 2 decimal places (i.e .1234 should be entered as 12.34).

Solution

Requirement (2) – Contribution Margin Ratio

Contribution Margin Ratio = [Contribution margin / Sales] x 100

= [$9,200 / 21,800] x 100

= 42.20%

Requirement (3) – Variable Expense Ratio

Variable Expense Ratio = [Total Variable Expenses / Sales] x 100

= [12,600 / 21,800] x 100

= 57.80%