MGT223H5 Study Guide - Final Guide: Earnings Before Interest And Taxes, Contribution Margin, Total Absorption Costing
Document Summary
Contribuion margin - the contribuion income statement is helpful to managers in judging the impact on proits of changes in selling price, cost, or volume. Cm is the amount remaining from sales revenue ater variable expenses have been deducted. Sales, variable expenses, and contribuion margin can also be expressed on a per unit basis. Contribuion approach: muliply the number of units sold above breakeven by the contribuion margin per unit. Cm raio: selling price per unit total cm total sales ex, if cm raio = 40%, each increase in sales increases contribuion margin by sh. 40. The equaion and contribuion margin methods can be used to determine the sales volume need to achieve a target proit. Unit sales to atain the target proit = The margin of safety is the excess of budgeted (or actual) sales over the break-even volume of sales. Margin of safety = total sales break-even sales.
