Dairy Days Ice Cream sells ice cream cones for $4 per customer. Variable costs are $3 per cone. Fixed costs are $2,500 per month. What is Dairy Days' contribution margin ratio

0.25 or 25 %

Explanation:

Contribution Margin ratio is defined as contribution expressed as a percentage or decimal of the sales revenue.

Where

Contribution = Sales - Variable Cost

                    = $4 - $3

                    = $ 1

Therefore,

Contribution Margin ratio = Contribution ÷ Sales

                                          = ($4 - $3) ÷ $3

                                          = 0.25 or 25 %