Question

In a multi-product contribution margin income statement, how can you calculate the revenues for a product where the only information you have is the variable cost per unit? Also, how to find the sales ratios for each product?

Answer 1

Contribution margin income statement refers to the income statement where all the variable expenses are deducted from the sales price or the revenue of the product, to find the contribution margin.

So by the help of contribution margin income statement, we can get the amount of contribution margin.

Now, we know that

Contribution margin + variable cost per unit = Revenue or sales price per unit

As we have the data of contribution margin from incom statement and variable cost per unit is already provided, therefore we can calculate the revenue by the the contribution margin and variable cost per unit.

Now coming on the sales ratios, as we have just seen how to find the revenue or sales price of a product. Once we got the sales price of the product, it is easy to find the sales ratios.

The term or quantity with which sales ratio is to calculated, we just need to divide that particular term of a specific quantity to the sales price of the product, and we will get the sales ratios.

So here we saw how to find the sales price or revenue from contribution margin when variable cost is given. And again how to calculate sales ratios, with the particulars given and found out.