Contribution margin ratio and its usefulness in business planning
Not what you're looking for?
Please show references.
1. What is meant by a product's contribution margin ratio? How is this ratio useful in planning business operations? Give an example of a company and specific items that might go into the calculation of the contribution margin. Can break-even sales be calculated by using contribution ratio?
2. Your friend remarked, 'A company will never drop a product from its product line that has a positive contribution margin. It will want to garner every bit of profit that it can.' Is this true in all cases? What are the risks and benefits of evaluating product continuation or implementation from using the contribution margin?
Purchase this Solution
Solution Summary
The contribution margin ratio and usefulness in business planning is examined.
Solution Preview
Get the answers with attachment.
Answer:
What is meant by a product's contribution margin ratio? How is this ratio useful in planning business operations? Give an example of a company and specific items that might go into the calculation of the contribution margin. Can break-even sales be calculated by using contribution ratio?
Product's contribution margin ratio is per unit contribution margin of the product divided by the per unit selling price of that product. Here per unit contribution margin of the product is the selling price per unit of the product less the variable cost per unit of that ...
Education
- MBA, Indian Institute of Finance
- Bsc, Madras University
Recent Feedback
- "I've posted a similar question for another course. It's post 657940, and it's a practice problem that I'd like to use for the final exam. Your help will be greatly appreciated. "
- "thank you!"
- "Thank you again Jayant. You are super fast. "
- "Thank you Jayant. You are appreciated. "
- "Again, thank you Jayant. You are wonderful. "
Purchase this Solution
Free BrainMass Quizzes
Academic Reading and Writing: Critical Thinking
Importance of Critical Thinking
MS Word 2010-Tricky Features
These questions are based on features of the previous word versions that were easy to figure out, but now seem more hidden to me.
Paradigms and Frameworks of Management Research
This quiz evaluates your understanding of the paradigm-based and epistimological frameworks of research. It is intended for advanced students.
Marketing Research and Forecasting
The following quiz will assess your ability to identify steps in the marketing research process. Understanding this information will provide fundamental knowledge related to marketing research.
Change and Resistance within Organizations
This quiz intended to help students understand change and resistance in organizations