wk4 dq2.docx - What is meant by a product contribution margin ratio How this ratio useful in planning business operation The contribution margin ratio

wk4 dq2.docx - What is meant by a product contribution...

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What is meant by a product contribution margin ratio? How this ratio useful in planning business operation? The contribution margin ratio is the ratio of contribution margin to total sales revenue. The contribution margin ratio is the difference between a company's sales and variable expenses , expressed as a percentage. The total margin generated by an entity represents the total earnings available to pay for fixed expenses and generate a profit. When used on an individual unit sale, the ratio expresses the proportion of profit generated on that specific sale. The contribution margin ratio shows the change in contribution margin that will result from a change in total sales [ CITATION Bra174 \l 1033 ] . If fixed costs don not change, then a dollar increase in contribution margin will result in a dollar increase in net purposes, knowledge of a product’s contribution margin ratio is extremely helpful in forecasting contribution margin and net operating income.
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  • Spring '18
  • professor newerze
  • Contribution Margin, 40%, Bragg, Merritt, product contribution margin ratio

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