ECONOMICS

Detailed explanation-1: -Last year, Connie’s Computers had a revenue of $350, 000 and total variable expenses of $200, 000. What is Connie’s Computer’s contribution margin ratio? Answers: 0.43.

Detailed explanation-2: -The contribution margin is the amount remaining from sales revenues after variable expenses have been deducted. The high-low method uses cost and activity data from just two periods to establish the formula for a mixed cost.

Detailed explanation-3: -The contribution margin ratio is calculated as (Revenue-Variable Costs) / Revenue.

Detailed explanation-4: -CVP analysis also manages product contribution margin. The contribution margin is the difference between total sales and total variable costs. For a business to be profitable, the contribution margin must exceed total fixed costs. The contribution margin may also be calculated per unit.

Detailed explanation-5: -The point of a CVP analysis is to determine how changes in variable and fixed costs will affect profits. What are the three elements of cost-volume-profit analysis? The three main elements are cost, sales volume and price. A CVP analysis looks at how these elements influence profit.