$1,69,000 is total contribution margin if sales volume increases by 30%. If a schister systems uses the following data in its cost-volume-profit analyses.
CM ratio = Contribution margin by sales = $1,30,000/$325000 = 0.40
Contribution margin = CM ratio * Sales
Contribution Margin = 0.40 * (1.3 * $3,25,000) = $1,69,000
The revenue of a company less all variable costs, divided by the cost revenue, is the contribution margin ratio (CM ratio). It is an illustration of the marginal gain from generating an extra unit.
Contribution Margin is the sum of money left over after paying your company's fixed expenses. That is, it refers to the excess revenue that cost your company makes after removing the variable costs associated with producing your goods.
One crucial way for assessing, managing, and planning your company's operating income profitability is the calculation of the contribution margin.
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