Calculation of contribution margin ratio
Contribution margin ratio = Contribution margin per unit +Sales price per unit =$12:$20 =60%
Thus, the contribution margin ratio is 60%.
Working note
Calculation of contribution margin per unit
Contribution margin per unit = Sales price per unit - Variable price per unit =$20-$8 =$12 per unit.
The contribution margin ratio is the percentage of contribution earned by the company for sales made and therefore is calculated as the contribution margin per unit of $12 divided by the sales price per unit of $20 which gives the ratio of 60%. This means out of the sale made by the company, 60% is earned by the company as a contribution margin.
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