MGT223H5 Chapter Notes - Chapter 7: Contribution Margin, Espresso, Income Statement
Document Summary
Contribution income statement = sales variable expenses = contribution margin fixed expenses = operating income. Contribution margin = amount remaining from sales after variable exp have been deducted. Contribution income statement= helpful to managers in judging impact on profits of changes in selling price, cost, or volume emphasis on cost behaviour. Fixed expenses / contribution margin per unit = break even point. Contribution margin ratio = cm per unit / sales per unit or cm / sales. Do not need to prepare income statement to estimate profits at particular sales volume. Simply multiply # of units sold above break-even by contribution margin per unit. Iclicker # 1 coffee klatch is an espresso stand in downtown office building. Avg selling price of a cup of coffee is . 49 and avg variable expense per cup is 0. 36. the average fixed exp per month is 1300. 2100 cups are sold each month on average.
