RSM222H1 Lecture : Textbook Notes on Chapter 6-Cost-Volume-Profit Analysis
Chapter 6 ± CVP Relationships
CM ratio:
- greater unit contribution margin = greater amt company is willing to spend in order to
increase unit sales
- the higher CM ratio means that once the break-even point is reached, profits will increase
more rapidly than at present
With less average contribution margin per dollar of sales, a greater level of
sales had to be achieved to provide sufficient contribution margin to
cover fixed costs.
- Decrease CM = increase BEP
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