# Metrics 4.docx

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21 Apr 2012
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Worksheet: Metric 4 Contribution Margin
1) Mohan, an artist, draws caricatures on the waterfront pier. It costs him
approximately \$5 in materials (paper and markers) for each caricature he
makes. He sells each caricature for \$20. Calculate the contribution margin in
terms of dollars and percent.
Contribution Margin (\$) = Revenue COGS
= \$20 - \$5
= \$15
Contribution Margin (%) = [Contribution per Unit (\$) /
Sale Price per Unit (\$)] * 100%
= [(Sale Price per Unit Variable Cost per Unit) /
Sale Price per Unit] *100%
= [(\$20 - \$5) / \$20] * 100%
= [\$15 / \$20] * 100%
= 0.75 * 100%
= 75%
2) The Hotel Grill Bar sells a set lunch for \$12. The food cost of sales used in
producing each set lunch is \$5. Additional variable costs are \$3 per lunch.
The fixed costs of the restaurant are \$3 per meal. What is the contribution
margin expressed in dollars and percent?
Variable Expenses = \$5 + \$3
= \$8
Contribution Margin (\$) = Revenue Variable Expense
= \$12 - \$8
= \$4
Contribution Margin (%) = [Contribution per Unit (\$) /
Sale Price per Unit (\$)] * 100%
= [(Sale Price per Unit Variable Cost per Unit) /
Sale Price per Unit] * 100%
= [(\$12 - \$8) / \$12] * 100%
= \$4 / \$12 * 100%
= 0.33 * 100%
= 33.3%
3) You are an online retailer of CDs, promoting sales via a ‘no postage and
packaging’ offer. You purchase your CDs from record companies for \$18.75.
Packaging and a padded envelope cost \$1.00 per CD; and postage is \$2.00. If
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