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Item $2$

AH $5-1$ Computing the Variable Expense and CM Ratios LO $5-1$

Annie's Homemade sells ice cream for $$5\mathrm{.}00$ per serving. Its variable cost is $$1\mathrm{.}25$ per serving and its total fixed costs are $$11,000$ per month.

Required:

What is Annie's variable expense ratio?

What is Annie's contribution margin $($CM$)$ ratio?

Assume Annie's raises its selling price per serving and all else remains constant.

Will its variable expense ratio increase, decrease, or hold constant? Will its contribution margin ratio increase, decrease, or hold constant?