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In another question cs ratio is 55 %. Variable cost per unit is 1.5. In the answer the selling price has been derived like this 1.5/1-0.55=3.33. I don’t understand the concept behind that computation. What’s going on here ?
I assume that you have watched all of my free lectures relating to this and that you are therefore happy that contribution = sales less variable costs, and that the CS ratio is the contribution divided by the selling price.
If the contribution is 55% of the sales, then the variable costs must be 45% of the sales.
The variable cost is 1.50 and since they are 45% of the selling price, then the selling price must be 1.50 / 45% = $3.33
My brain was stuck on this problem for hours. Thank you for providing the relief. XD
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