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To calculate the break-even point in terms of revenue (a.k.a. currency units, a.k.a. sales proceeds) instead of Unit Sales (X), the above calculation can be multiplied by Price, or, equivalently, the Contribution Margin Ratio (Unit Contribution Margin over Price) can be calculated:
In Cost-Volume-Profit Analysis, where it simplifies calculation of net income and, especially, break-even analysis.. Given the contribution margin, a manager can easily compute breakeven and target income sales, and 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.
Contribution margin is used to help measure product profitability. Business owners generally use the contribution margin ratio on a per-product basis to determine the portion of sales generated ...
Following a matching principle of matching a portion of sales against variable costs, one can decompose sales as contribution plus variable costs, where contribution is "what's left after deducting variable costs". One can think of contribution as "the marginal contribution of a unit to the profit", or "contribution towards offsetting fixed costs".
It is shown graphically as the point where the total revenue and total cost curves meet. In the linear case the break-even point is equal to the fixed costs divided by the contribution margin per unit. The break-even point is achieved when the generated profits match the total costs accumulated until the date of profit generation.
The purpose of profit-based sales target metrics is "to ensure that marketing and sales objectives mesh with profit targets." In target volume and target revenue calculations, managers go beyond break-even analysis (the point at which a company sells enough to cover its fixed costs) to "determine the level of unit sales or revenues needed not only to cover a firm’s costs but also to attain ...
"A consistent theoretical and empirical finding in economics is that domestic consumers and domestic firms bear the burden of a tariff, not the foreign country," the nonpartisan Budget Lab at Yale ...
The contribution margin is the revenue excess from sales over variable costs. The concept of contribution margin is particularly useful in the planning of business because it gives an insight into the potential profits that a business can generate. The following chart shows the income statement of a company X, which has been prepared to show ...