Contribution Margin = Sales - Variable Cost Sales Less:Variable Cost Contribution Margin Less:Fixed Cost Net profit(Loss)
Contribution margin = Sales revenue - variable cost Contribution margin = 10 million - 6 million Contribution margin = 4 million
Break even point = Fixed cost / Contribution margin ratio Contribution margin ratio = (sales - variable cost ) / Sales
Formula for Breakeven point: Breakeven point = Fixed Cost / Contribution margin ratio Contribution margin ratio = Sales / contribution margin Contribution margin = sales - variable cost
Contribution margin per unit is the contribution which contribute by sales of one unit for the recovery of fixed cost after fulfiling the variable cost of product.
Contribution Margin = Sales - Variable Cost Sales Less:Variable Cost Contribution Margin Less:Fixed Cost Net profit(Loss)
sales-variable cost= contribution
Contribution margin = Sales revenue - variable cost Contribution margin = 10 million - 6 million Contribution margin = 4 million
Break even point = Fixed cost / Contribution margin ratio Contribution margin ratio = (sales - variable cost ) / Sales
Formula for Breakeven point: Breakeven point = Fixed Cost / Contribution margin ratio Contribution margin ratio = Sales / contribution margin Contribution margin = sales - variable cost
Contribution margin per unit is the contribution which contribute by sales of one unit for the recovery of fixed cost after fulfiling the variable cost of product.
contribution margin = sales - variable cost
Breakeven point = Fixed Cost / Contribution margin Contribution margin = (Sales - Variable cost) / Sales
The Profit Volume (PV) Ratio is the ratio of Contribution over Sales. It measures the Profitability of the firm and is one of the important ratios for computing profitabilty. The Contribution is the extra amount of sales over variable cost. Contribution is also Fixed cost plus profit. Profit = Sales - Variable Cost - Fixed Cost. Thus Contribution is: Profit + Fixed Cost = Sales - Variable Cost. Therefore PV Ratio = (Contribution/Sales)X100. (This as a percentage of sales)
Contribution margin ratio determines the percentage of variable cost in over all sales while contribution margin per unit tells the variable cost portion in per unit total cost or sales price.
Increase in variable cost reduces the contribution margin as following formula suggests”Contribution margin = Sales revenue – Variable Cost
The Profit Volume (PV) Ratio is the ratio of Contribution over Sales. It measures the Profitability of the firm and is one of the important ratios for computing profitabilty. The Contribution is the extra amount of sales over variable cost. Contribution is also Fixed cost plus profit. Profit = Sales - Variable Cost - Fixed Cost. Thus Contribution is: Profit + Fixed Cost = Sales - Variable Cost. Therefore PV Ratio = (Contribution/Sales)X100. (This as a percentage of sales)