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    Contribution margin

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    Use the formula stated: Contribution Margin = Revenue - Variable Costs
    (CM = R - VC)

    Your top two Agents ... Let's call them ... Agent J and Agent K, both
    bring in two "must do deals" with new extraterrestrial ah ... accounts.

    Agent J's is for $ 100,000 ... 50 units at sales price $2,000 per unit
    Agent K's is for $ 50,000 ... 20 units at sales price $2,500 per unit

    At first pass ... Agent J's looks to be the better proposal!

    After all $100,000 is MORE than $ 50,000 right? And MORE is always better?

    Variable cost is $1,900 per unit.
    Yet when you run the numbers, using a Contribution Margin Statement, Agent
    K's proposal is now the better deal ...

    How can that be? What could be done to Agent J's proposal to make it better?

    © BrainMass Inc. brainmass.com June 4, 2020, 12:58 am ad1c9bdddf
    https://brainmass.com/business/finance/contribution-margin-370510

    Solution Preview

    Use the formula stated: Contribution Margin = Revenue - Variable Costs
    (CM = R - VC)

    Your top two Agents ... Let's call them ... Agent J and Agent K, both
    bring in two "must do deals" with new extraterrestrial ah ... accounts.

    Agent J's is for $ 100,000 ... 50 units at sales price $2,000 per unit
    Agent K's is for $ 50,000 ... 20 units at sales price $2,500 ...

    Solution Summary

    Contribution margin is determined.

    $2.19

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