Contribution Margin Ratio

We can use the Contribution Margin Ratio in an CVP calculations. The contribution format income statement will show the Sales revenues and the Variable expenses and the contribution margin. We will apply percentages to each variable expressed as 100% for sales revenues, % for variable expenses divided by sales revenues and a % for Contribution margin divided by variable expenses. The Contribution Margin Ratio is computed as CM ratio = Contribution Margin divided by sales and CM ratio = Unit Contribution margin divided by Unit selling price