This contribution margin percentage was calculated by taking 10% off variable costs instead of discounting the sales price.
This contribution margin percentage calculation did not include the 10% sales discount.
See correct answer.
The contribution margin is equal to selling price minus variable costs (Sales ? VC = CM). If variable costs are $100 per unit, then the sales price is $160 per unit ($100 × 160%). If there is a markdown of 10%, then the new sales price will $144 ($160 × 90%) and the new contribution margin will be $44 ($144 ? $100). The new contribution margin ratio will be 30.6% ($44 ÷ $144).
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