Question
Contribution Margin. Implicit in our analysis has been the notion that while some of a company's expenses are fixed, its revenues and some of its
Contribution Margin. Implicit in our analysis has been the notion that while some of a company's expenses are fixed, its revenues and some of its expenses do vary as volume varies. It follows, therefore, that the amount by which each unit's revenue exceeds each unit's variable expense contributes to the company's ability to pay its fixed expenses. In Van Horn case, the revenue per unit was $75 and the variable cost was equal to 60 percent of revenue, or $45 a unit. 7 State these estimates algebraically. The contribution margin is $...... a unit. The break-even point can be located by finding out how many mowers must be sold to produce a total contribution margin equal to the anticipated fixed costs. Break-even volume is: Break-even in monetary terms is reached at: Margin of Safety. Van Horn division's budgeted volume for the year was 50,000 mowers. The estimated margin of safety therefore was: . mowers In other words, the division will cover its total costs even if volume turns out to be 20,000 mowers fewer than management is anticipating
Step by Step Solution
There are 3 Steps involved in it
Step: 1
Get Instant Access to Expert-Tailored Solutions
See step-by-step solutions with expert insights and AI powered tools for academic success
Step: 2
Step: 3
Ace Your Homework with AI
Get the answers you need in no time with our AI-driven, step-by-step assistance
Get Started