BKK Corporation sells headphones with a unit selling price of $200 and a contribution margin ratio of 40%. Unit variable costs are expected to increase $10 next year with no change to the unit selling price. Calculate the new contribution margin ratio.

Based on the selling price and the variable costs, the new contribution margin ratio would be 35%.

First find the new contribution margin which is:
= Selling price - Variable cost

Solving gives:

= 200 - ( (60% x 200) + 10)

= 200 - (120 +10)

= $70

The contribution margin ratio will be:

= Contribution margin / Selling price

= 70/ 200

= 35%

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