Asked by Shauntae Davis on May 26, 2024
Verified
What are the unit contribution margin and the contribution margin ratio? What do these measures reveal about a company's cost structure?
Contribution Margin Ratio
A metric that shows what percentage of sales revenue is available to cover variable costs and contribute to fixed costs after all variable expenses have been covered.
Cost Structure
The composition of fixed and variable costs that a company incurs during the production of goods or services, affecting profitability.
- Understand the concepts of unit contribution margin and contribution margin ratio and their significance to a company's cost structure.
Verified Answer
KA
Kaycee AlanisMay 30, 2024
Final Answer :
The unit contribution margin is the sales price per unit minus the total variable cost per unit.The contribution margin contributes to covering fixed costs and generating profits on a per unit basis.The contribution margin ratio is the unit contribution margin divided by sales price per unit.
Learning Objectives
- Understand the concepts of unit contribution margin and contribution margin ratio and their significance to a company's cost structure.
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