Contribution Margin - Printable Version +- Accountancy Forum (https://www.accountancy.com.pk/forum) +-- Forum: The Profession (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=4) +--- Forum: Accounting and Audit (https://www.accountancy.com.pk/forum/forumdisplay.php?fid=7) +--- Thread: Contribution Margin (/showthread.php?tid=6456) Contribution Margin - shahid amin - 08-27-2009 Difinition Sales less varible costs are called contribution margin. Sales price - Variable costs = Contribution Margin Contribution Margin Ratio Uses generally there are two types of decisions a) Shor term Decisons b) Long Term decisions Short term decisons relates to the increase or decrease in sales or production. CM Ratio is used for short term decisions, we make short term decisions on the basisi of CM Ratio or CM per unit. we focus in that product which have high CM Ratio or CM per unit. Where as long term decision relates to the adding or dropping the product it is totally based on segment margin. Segment margin I will disscussed later on........... Calculation of Contributio Margin Sales.......................................\$50000 less variable costs......................... 30000Contributio Contribution Margin...........................20000 Calculation of CM Ratio contribution margin / sales*100= CM Ratio \$20000/50000*100 = 40% Best Regards SHAHID AMIN - tariq aziz - 09-03-2009 shahid plz name some factors which affacts CM - shahid amin - 09-03-2009
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Originally posted by tariq aziz
shahid plz name some factors which affacts CM
great Mr.Tariq....good question Following are the factors which affacts the contribution margin per unit 1) The Sales Price per unit 2) The variable price per unit