BU121 Lecture Notes - William Ury, Fixed Cost
Document Summary
When fixed costs covered by contribution from sales. = fc / contribution per unit or % margin. Decide when to change strategy start new approach (make sure you can actually make money off it) If you change your approach to something, use the decision point to make sure it will be more profitable. Make decisions that affect costs and/or volume fine-tuning a strategy. Total incremental contribution > incremental fixed and negligible negative qualitative impact (any other issues should be minor) Variable costs drop by 10, which means contribution increases by 10. Abc company currently sells 400 units of a product at /unit and variable costs are. /unit : contribution per unit = - = /unit, contribution margin = 1 (/) = 40% total $ contribution = /unit x 400 units = ,000. Spend an additional ,000 that will increase sales by ,000. ,000 x 40% contribution = ,000 additional contribution.
