ADMS 1500 Lecture Notes - Lecture 6: Income Statement, Variable Cost, Contribution Margin

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Contribution margin is how much revenue remains after variable costs have been deducted. contribution margin per unit: cm ratio: is the contribution margin per unit divided by the unit-selling price (generally expressed as a percentage). Break-even analysis: occurs when total sales equal variable costs plus fixed costs: mathematical equation, cm technique: fixed costs divided by contribution margin per unit = break- even point in units. Contribution margin ratio: fixed costs divided by contribution margin ratio = break- even point in dollars: graphic presentation: shows costs, volume, and profits.

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