Answer:
To determine the company's contribution margin (CM) ratio, we need to follow these steps:
1. Calculate the total contribution margin.
2. Divide the total contribution margin by total sales to get the CM ratio.
First, let's calculate the total contribution margin:
\[ \text{Total Contribution Margin} = \text{Total Sales} - \text{Total Variable Expenses} \]
Given:
- Total Sales = $172,000
- Total Variable Expenses = $142,760
\[ \text{Total Contribution Margin} = \$172,000 - \$142,760 = \$29,240 \]
Next, we calculate the CM ratio:
\[ \text{CM Ratio} = \frac{\text{Total Contribution Margin}}{\text{Total Sales}} \]
\[ \text{CM Ratio} = \frac{\$29,240}{\$172,000} \]
\[ \text{CM Ratio} \approx 0.17 \]
So, the company's contribution margin ratio is approximately 0.17 or 17%.