Unit Contribution Margin Essay Example | Topics and Well Written Essays - 500 words

Unit Contribution Margin - Essay ExampleAt break-even point, the Cost-Volume-Profit analysis equation is reduced to PX = xv + FC Where p is the price per unit, x is the number of units, v is the variable apostrophize per unit, and total fixed cost is FC. Solving the equation for Break-even sales units Break-even gross sales Units = x = FC ( p v ) Since unit contribution margin (Unit CM) is equal to unit sale price (p) less(prenominal) unit variable cost (v) thus, Unit CM = p v Hence, Break-even Sales Units = x = FC Unit CM Break-even Sales Dollars = Price per Unit Break-even Sales Units or What is contribution margin ratio and when is it most useful? The contribution margin ratio is the measure of sales, facility returns or selling price that residues aft(prenominal) all variable costs and variable costs have been enclosed. Contribution margin ratio= (Sales-variables) / sales Contribution margin ratio plays a cardinal role in Determining the profits that will rise from sever al sales levels Assessing the influence on earnings of changes in sales. In particular, it can be used to estimation the decline in profits if sales drop, and so is an standard tool in the making of budgets. How is the breakeven equation modified to take into work out the sales required to earn a target profit?