Contribution margin ratio is equal to Contribution contribution pee unit upon selling price $45-$29 = $16, $16÷$45 = 0.35
A business's contribution margin ratio is calculated by dividing its total revenue by its variable costs. Sales Revenue / (Sales Income - Total Variable Costs) = Contribution Margin Ratio. The marginal gain from manufacturing one extra unit is indicated by the contribution margin ratio.
The contribution margin may not always be a reliable indicator of economic gain. There may be significant fixed costs that businesses must take into account.
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