Page 84 - 5.2 i. Manac Costing ITC Summarised Notes

ITC EXAM PREP

Contribution Ratio

Contribution is expressed as a percentage of sales.

Formula = Sales – Variable costs

Sales

Example:

Selling price per unit = R50

Variable costs per unit = R40

Therefore contribution per unit = R50 – R40 = R10

Contribution ratio = R10 / R50 = 20%

For each R1 sale a contribution of 20c is earned.

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