COST ACCOUNTING
COST VOLUME PROFIT ANALYSIS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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P 100, 000
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P 160, 000
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P 200, 000
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P 300, 000
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Detailed explanation-1: -The contribution margin is calculated by subtracting the total variable costs from the total sales revenue. The formula is: Contribution Margin = Total Sales Revenue – Total Variable Costs.
Detailed explanation-2: -“Contribution margin shows you the aggregate amount of revenue available after variable costs to cover fixed expenses and provide profit to the company, ” Knight says. You might think of this as the portion of sales that helps to offset fixed costs.
Detailed explanation-3: -Contribution margin is helpful for determining how sales, variable costs, and fixed costs all influence operating profit. It gives business owners a way of assessing how various sales levels will affect profitability. It can be calculated at the unit or total level and can be expressed in dollars or as a percentage.