Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

4. Merchandising Operations

Net Sales

Financial Accounting

4. Merchandising Operations

Net Sales

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Multiple Choice

The percent by which a product's unit selling price exceeds its total unit variable cost is the:

Net sales percentage

Operating margin

Gross profit margin

Contribution margin ratio

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Verified step by step guidance

Understand the concept of Contribution Margin Ratio: It represents the percentage of each sales dollar that contributes to covering fixed costs and generating profit after variable costs are deducted.

Recall the formula for Contribution Margin Ratio: \( \text{Contribution Margin Ratio} = \frac{\text{Contribution Margin}}{\text{Sales}} \times 100 \). Contribution Margin is calculated as \( \text{Sales} - \text{Variable Costs} \).

Identify the key components in the problem: The unit selling price represents the sales revenue per unit, and the total unit variable cost represents the variable cost per unit.

Apply the formula: Subtract the total unit variable cost from the unit selling price to find the Contribution Margin per unit. Then divide this value by the unit selling price and multiply by 100 to express it as a percentage.

Interpret the result: The Contribution Margin Ratio indicates the percent by which the product's unit selling price exceeds its total unit variable cost, aligning with the definition provided in the problem.