Explore BrainMass

what is the contribution margin of Managerial Accounting

This content was STOLEN from BrainMass.com - View the original, and get the already-completed solution here!

I need to determine what is the contribution margin of Managerial Accounting and what is the difference between the contribution approach to the income statement and the traditional approach to the income statement?

© BrainMass Inc. brainmass.com October 24, 2018, 7:37 pm ad1c9bdddf

Solution Preview

Hi there,

Here is some info for you regarding Contribution Margin:

Contribution margin analysis is a relatively simple tool afforded by cost/volume/profit analysis. In simplest terms, the contribution margin is total revenue minus total variable cost. This difference can be expressed as a percentage of total revenue. A company's contribution margin can be expressed as the percentage of each sale that remains after the variable costs are subtracted. Given the contribution margin, a manager can make better decisions about whether to add or subtract a product line, about how to price a product or service, and about how to structure sales commissions or bonuses. The contribution margin is computed using a special type of income statement that has been reformatted to group together a business's fixed and variable costs.

Here's an example of a contribution format income statement:

Beta Sales Company Contribution Format Income Statement
For Year Ended December 31, 200X
Sales $ 462,452
Less Variable Costs:
Cost of Goods Sold$ 230,934
Sales Commissions$ ...

See Also This Related BrainMass Solution

Contribution Margin, Gross Profit, Managerial Accounting

1. What are the similarities between contribution margin and gross profit.
2. Steven started ZZ Tire Company 10 years ago. The company started as an installer and seller of tires. The company has now expanded to the point where they now manufacture tires in China to supply the retail stores. They have retail sales of over $10 Million a year. Right now, the only accounting that takes place is regular bookkeeping for tax purposes. The company performs no managerial accounting. Write out a couple of paragraphs where you tell Steven why he should implement managerial accounting, and explain to him what managerial accounting is. Go through basic points explaining why it is important to implement managerial accounting.

View Full Posting Details