HTM 2030 Lecture Notes - Lecture 4: Contribution Margin, Variable Cost, Fixed Cost
8 Aug 2017
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A percentage is always a relationship between items. Fc + p is caleed contributinon margin in dollars. Contribution rate is a percentage relative to sales. The variable is the ratio of vc to sales. It tells us the % of dollar sales needed to cover vc, always a ratio. Vr = vc/s = 6. 70 /19. 25 = 0. 35 or 34. 5% not 0. 35% Total sales = $ 16. 37 x 19,363 = 316,988. 68. Vc = 316,988 -142,408 22,952 = 151 627. Vc = 304,260 136,137 33,381. 80 = $ 134,741. 20. The point of sales at which all costs are covered without any profit being made. Variable rate% can be projected as a constant, and fixed costs and profit ($) can be projected as a constant. We need both of these constant figures to make projections. To forecast this, we go back to a couple relationships: cr is a relationship between cm and sales, we can use it as a base formula to calculate cr:
