Dairy days ice cream sells ice cream cones for $2.00 per customer. variable costs are $1.00 per cone. fixed costs are $2,900 per month. what is dairy days' contribution margin ratio?

The capacity of a business to convert revenues into profits is gauged by margin ratios. Without a reference point, standalone data just offers a snapshot and has limited relevance. Applications for margin ratios include credit research, firm performance, and valuation.

What is a good contribution margin ratio?

The ratio or percentage of a contribution margin should be as near to 100% as possible. The more money is available to pay the company's overhead expenses, or fixed costs, the higher the ratio. The contribution margin ratio, however, is more likely to be far below 100%, most certainly around 50%.

According to the given information:

ice cream cones for $2.00 per customer

variable costs are $1.00 per cone

fixed costs are $2,900 per month

contribution margin ratio

So,

We know that :

Contribution margin ratio = contribution margin

Contribution margin per unit = sales - variable expenses

= 2-1

= $1

substituting the values :

As we know that

Contribution margin ratio = contribution margin

= 1/2

The marginal ratio of the given statement = 1/2

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