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The contribution margin ratio is the contribution expressed as a fraction of

  • A.fixed cost
  • B.variable cost
  • C.total cost
  • D.sales revenue

Answer: D

Correct answer: sales revenue

The contribution margin ratio is

\[ \frac{p - v}{p} \]

the proportion of each sales rupee left after the variable costs of that sale. It is used when the break-even is wanted in money rather than in units, which is essential where a firm sells several products or cannot meaningfully count units.

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