Answer:
The question is incomplete; the complete question is given below.
Selling Price per unit Variable cost per unit
Product $ $
Snowboards 20.00 170.00
Skis 400.00 225.00
Poles 50.00 20.00
Salvador's contribution margin is 46.2%
Explanation:
Contribution is the amount generated from the sales of a product to cover part of the total fixed cost.
Contribution is an important concept in decision making because it helps to determine the profitability of individual products where a set of products benefit from the same fixed cost. <em>it </em><em>helps in prioritizing the allocation of resources to different products based on their profitability</em> .
Contribution per unit = Selling price per unit- variable cost per unit
Total contribution= Contribution per unit * units sold
Contribution margin ration: The proportion of sales realised as contribution is known as contribution margin ratio (CMR) . It represents the amount generated as contribution from every one dollar worth of sales. A 60% margin means that $60 is made as contribution from evry sales of $100, for example.
It is a calculated as follows:
Single-product scenario:
C.M.R= contribution per unit/ selling price per unit
Multiple-products scenario:
C.M.R= contribution from a mix / revenue from a mix
We shall use the multiple-products formula
Snowboard ski Poles Total
$ $ $
Selling price 320 400 50
variable cost <u> (170) (225) (20)</u>
Contribution per unit (SP-VC) <u>150 175 30</u>
Cont from a mix (cont× unit) 1050 525 60
Revenue from a mix (SP× unit) 2240 1200 100
Contribution margin ratio= Cont. from a mix/ Rev from a mix
= (1050+525+60)/(2240+1200+100)
=(1635 / 3540) × 100
= 46.2 %
