In 250 words explain What is contribution margin per unit? What is contribution margin ratio?

Solutions

Expert Solution

Contribution margin per unit .

The term contribution is moslty used in marginal costing.The contribution margin can be stated on a gross or per-unit basis. It represents the incremental money generated for each product/unit sold after deducting the variable portion of the firm's costs. The contribution margin is computed as the selling price per unit, minus the variable cost per unit.

Contribution per unit = sales price per unit - variable cost per unit.

Contribution margin ration.

= (contributin per unit or contribution )/(sales per unit or sales )*100

The contribution margin ratio is the percentage of sales revenues, service revenues, or selling price remaining after subtracting all of the variable costs and variable expenses.Expressed another way, the contribution margin ratio is the percentage of revenues that is available to cover a company's fixed costs, fixed expenses, and profit

Note that the contribution margin ratio is not the same as the gross margin ratio or gross profit percentage. Further, the contribution margin ratio cannot be computed from the amounts appearing on a company's external income statement.

ekkarill92 answered 1 year ago

Next > < Previous

Related Solutions

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the following independent situations, calculate the amount(s) required. Required: 1. At the break-even point, Jefferson Company sells 85,000 units and has fixed cost of $348,600. The variable cost per unit is $0.35. What price does Jefferson charge per unit? Note: Round to the nearest cent. $ 2. Sooner Industries charges a price of $127 and has fixed cost of $360,500. Next year, Sooner expects to...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the following independent situations, calculate the amount(s) required. Required: 1. At the break-even point, Jefferson Company sells 95,000 units and has fixed cost of $349,700. The variable cost per unit is $0.15. What price does Jefferson charge per unit? Note: Round to the nearest cent. $ 2. Sooner Industries charges a price of $129 and has fixed cost of $421,000. Next year, Sooner expects to...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the following independent situations, calculate the amount(s) required. Required: 1. At the break-even point, Jefferson Company sells 85,000 units and has fixed cost of $351,900. The variable cost per unit is $0.30. What price does Jefferson charge per unit? Note: Round to the nearest cent. $ 2. Sooner Industries charges a price of $136 and has fixed cost of $391,500. Next year, Sooner expects to...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the following independent situations, calculate the amount(s) required. Required: 1. At the break-even point, Jefferson Company sells 85,000 units and has fixed cost of $346,500. The variable cost per unit is $0.10. What price does Jefferson charge per unit? Note: Round to the nearest cent. $ 2. Sooner Industries charges a price of $98 and has fixed cost of $476,500. Next year, Sooner expects to...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the...

Price, Variable Cost per Unit, Contribution Margin, Contribution Margin Ratio, Fixed Expense For each of the following independent situations, calculate the amount(s) required. Required: 1. At the break-even point, Jefferson Company sells 115,000 units and has fixed cost of $346,800. The variable cost per unit is $0.10. What price does Jefferson charge per unit? Note: Round to the nearest cent. $ 2. Sooner Industries charges a price of $116 and has fixed cost of $395,500. Next year, Sooner expects to...

If total fixed costs is $100,000, contribution per unit is $25 and the contribution margin ratio...

If total fixed costs is $100,000, contribution per unit is $25 and the contribution margin ratio is 40% and the company desired target profit of $25,000, what are the values of the followings (see page 97): a) Break-Even-Point in unit = _________________? b) Break-Even-Point in sales dollars________________________?

Calculate the contribution margin per unit and the total contribution margin

Sweet Taste has the capacity to produce either 52,000 corncob pipes or 30,000 cornhusk dolls per year. The pipes cost $6.75 each to produce and sell for $15.00 each. The dolls sell for $17.50 each and cost $7.75 to produce.RequiredCalculate the contribution margin per unit and the total contribution margin for Pipes and Dolls. Assuming that Sweet Taste can sell all it produces of either product, should it produce the corncob pipes or the cornhusk dolls? (Round "Contribution margin per unit"...

Calculate the contribution margin per unit and the total contribution margin

Gooey Relish has the capacity to produce either 54,000 corncob pipes or 25,200 cornhusk dolls per year. The pipes cost $3.60 each to produce and sell for $9.00 each. The dolls sell for $12.00 each and cost $4.80 to produce. RequiredAssuming that gooey relish can sell all it produces of either product, should it produce the corncob pipes or cornhusk dolls? Sho computations to support your answer.

Is the break-even volume, in units, a) the ratio of fixed cost per unit contribution margin...

Is the break-even volume, in units, a) the ratio of fixed cost per unit contribution margin or b) the ratio of selling price per unit contribution margin? If the prevailing market interest rate increases, does the purchase price of an annuity decrease or increase? When calculating the future value of an annuity due, is the end date at the beginning or end of the last payment interval?

Determine (a) the contribution margin ratio, (b) the unit contribution margin, and (c) income from operations.

Lanning Company sells 160,000 units at $45 per unit. Variable costs are $27 per unit, and fixed costs are $975,000. Determine a) the contribution margin ratio,(b) the unit contribution margin, and c) income from operations.

Subjects