MANAGEMENT

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BUISENESS MANAGEMENT

FINANCIAL MANAGEMENT

Question [CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
How is Contribution calculated?
A
Sales = Contribution
B
GOP-Sales = Contribution
C
Revenue-Direct Costs (Engagements) = Contribution
D
Direct Costs + Sales = Contribution
Explanation: 

Detailed explanation-1: -Contribution margin is calculated as Revenue-Variable Costs. The contribution margin ratio is calculated as (Revenue-Variable Costs) / Revenue.

Detailed explanation-2: -Contribution margin equals total revenue minus variable costs. So, if you make $500 on a sale and spend $100 to make it happen, then your contribution margin is $400.

Detailed explanation-3: -Thus, the calculation of contribution per unit is: (Total revenues-Total variable costs) รท Total units = Contribution per unit. When only one product is being sold, the concept can also be used to estimate the number of units that must be sold so that a business as a whole can break even.

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