1-

he contribution margin ratio is computed as:

Multiple Choice

• sales minus variable costs, divided by sales.

• sales divided by variable costs.

• sales minus fixed costs, divided by sales.

• fixed costs plus variable costs, divided by sales.

2-

3-

Helicopter Gear is planning to expand its product line, which requires investment of $474,000 in special-purpose machinery. The machinery has a useful life of six years and no salvage value. The estimated annual results of offering the new products are as follows:

Revenue	$ 527,000
Expenses (including straight-line depreciation)	(500,800)
Increase in net income	$ 26,200

All revenue from the new products and all expenses (except depreciation) will be received or paid in cash in the same period as recognized for accounting purposes.

The payback period for this proposed investment is: