ADMN 3021H Lecture Notes - Lecture 5: Contribution Margin, Fixed Cost, Income Statement

• School: Trent University
• Department: Business Administration
• Course: ADMN 3021H
• Professor: Jaime Morales

Document Summary

Relevant data for june: unit selling price of dvd player, unit variable costs, total monthly fixed costs, units sold. In multiproduct companies, the sales mix is constant. In manufacturing companies, inventories do not change (units produced = units sold) Contribution margin is available to cover fixed costs and to contribute to income. Contribution per margin unit = unit selling price unit variable costs. Example: calculation for vargo video: 200 = 500 300 to cover fixed costs of ,000, vargo video must sell 1,000 dvd players (,000 / ) before it earns any net income. Every dvd sold above 1,000 will generate a contribution margin of . Cm radio shows the percentage of each sales dollar available to apply toward fixed costs and profits. Contribution margin ratio = contribution margin per unit / unit selling price. Cm ratio (40%) x increase in sales (,000) If vargo video"s sales increases by ,000, net income increases by ,000.